As a portfolio manager at a mid-sized asset management firm, you are tasked with analyzing the investment behavior of retail investors in the context of equity markets. Recent empirical studies have revealed that retail investors often exhibit irrational behavior influenced by various cognitive biases, leading to underperformance relative to established market benchmarks.
Discuss how behavioral finance concepts, including overconfidence, loss aversion, and herd behavior, can impact the decision-making processes of retail investors. Furthermore, provide strategies that your firm could implement to help mitigate these biases and enhance the investment outcomes for your retail clients.