Financial Advertising in the Second Generation of Behavioral Finance
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Abstract
ABSTRACT Financial economists writing about financial advertising often describe them as fluff at best and misleading or fraudulent at worst. This description typifies the first generation of behavioral finance that described people as irrational, misled by ads into cognitive and emotional errors. The second generation of behavioral finance describes people as normal. It acknowledges the full range of people's normal wants and distinguishes wants from errors. Some financial ads exploit errors, whereas others cater to wants. Our wants include the utilitarian, expressive, and emotional benefits of riches and protection from poverty, nurturing our children and families, playing games and winning, staying true to our values, gaining respect and high social status, promoting fairness, paying no taxes, and more.