Behavioral Finance and Market Anomalies in Active Equity Investing

Consider the recent findings in market anomalies, specifically the underperformance of certain value stocks despite attractive fundamentals. A hedge fund manager argues that this may be linked to behavioral biases affecting market participants and hampers the value strategy's effectiveness. In this context, analyze the impact of behavioral finance on market anomalies in stock selection and discuss ways active equity investors can capitalize on these anomalies.

In your response, you should cover the following aspects:

• Define key behavioral finance concepts that contribute to market anomalies.
• Evaluate how these concepts can lead to deviations from expected price efficiency.
• Discuss practical strategies that active equity investors may employ to exploit these anomalies.