Richard Thaler, who was just awarded a Nobel Prize in Economics, “upended how people think about financial markets, helping found the field of behavioral finance,” according to an article in The Wall Street Journal.

As Justin Lahart of WSJ put it, “Nobody gets a Nobel Prize for saying that stupid things happen in financial markets. One of the reasons economist Richard Thaler just got one is that he helped explain why.” Thaler’s research challenged the widely accepted view that the financial markets operate efficiently, incorporating new information “to reflect the underlying asset values.”

In the 1980s, the article says, Thaler theorized that stocks had suffered poor performance over the prior three years because investors overreacted to unexpected news events, therefore driving valuations “out of whack.”

According to Wesley Chan, director of stock selection research at Acadian Asset Management, Thaler’s insights have been important because they provide a “framework for how investors behave” which can help explain how market inefficiencies might be corrected.