In this chapter, the theoretical framework of this study will be established. First, the evolution of behavioural finance will be discussed, followed by a discussion on theories of overconfidence and limited attention bias. Next, the behavioural three-factor model introduced by Daniel, Hirshleifer, and Lin (2020) will be examined, given its significance for this study. The role of behavioural biases during bull and bear markets will then be explored. Next, the intersection of behavioural finance and sustainable finance will be analyzed, given its relevance for this study. This will include a look at behavioural biases in sustainability investments, the EU-US ESG region bias and empirical evidence on the performance of sustainability-focused funds during volatile market conditions.