Final answer:
Behavioral finance is a branch of economics that combines insights from psychology with traditional economic theory to explain how individual investors make financial decisions.
Step-by-step explanation:
Behavioral finance is a branch of economics that combines insights from psychology with traditional economic theory to explain how individual investors make financial decisions. It suggests that investors may have cognitive biases and misconceptions that can lead to irrational behavior and mispricing of securities. For example, people often overvalue losses compared to gains, and this can drive prices away from their fair values. Therefore, the statement that behavioral finance deals with the idea that individual investors have built-in biases and misconceptions that can drive prices away from fair values is true.