Top Research Papers on Behavioral Finance

The purpose of this study is to determine whether there is a relationship between financial behavior based on income, financial literacy and a personal lifestyle. This study uses primary data through a data collection process by distributing questionnaires online (using Google Forms) among the total of 50 respondents. The data analysis technique used here is SPSS, version 25. The results of this study indicate that there is a significant positive effect between financial literacy variables and financial behavior. Meanwhile, income and lifestyle variables seem to have no influence on financial ...

This paper presents a bibliometric analysis of relevant publications in the field of behavioral finance and behavioral accounting. The analysis shows that the emerging themes of research in recent years in behavioral finance is on investors’ sentiment, social media, investors’ attention, and financial literacy. In the field of behavioral accounting, biases such as  overconfidence, framing effects or cognitive constraints on information processing, have been explored in greater detail. Other than cognitive biases, this field includes studies such as behavioral tax, organizational ecology, and ...

This paper highlights the effects of neurofinance, which is the study of the human brain and its impact on financial decision-making behavior. It explains why humans often deviate from the principles of conventional finance theory. The primary objective of this paper is to review the field of behavioral finance, including the emerging area of Neurofinance research conducted within this domain. In order to achieve this goal, behavioral finance, its characteristics and Neurofinance are briefly presented. Financial and investment decisions made by individuals are considered to be both cognitive a...

We provide the first economic research on ‘buy now, pay later’ (BNPL): an unregulated FinTech credit product enabling consumers to defer payments into interest-free instalments. We study BNPL using UK credit card transaction data. We document consumers charging BNPL transactions to their credit card. Charging of BNPL to credit cards is most prevalent among younger consumers and those living in the most deprived geographies. Charging a 0% interest, amortizing BNPL debt to credit cards – where typical interest rates are 20% and amortization schedules decades-long – raises doubts on these consume...

Abstract Using multinomial logit methodology for financing application decisions for bank loans, credit lines and trade credits, we show that firms’ financial behavior is driven by their lagged experience. Moreover, the optimism and pessimism of firms (animal spirit) is another important determinant. Our results stress the importance of the behavioral perspective to corporate finance. The policy of quantitative easing of the ECB had only weak effects on the access to banking loans, while it was significantly correlated with lower internal funding. Our results have possible implications to unde...

People tend to be penny wise and pound foolish and cry over spilt milk, even though we are taught to do neither. Focusing on the present at the expense of the future and basing decisions on lost value are two mistakes common to decision-making that are particularly costly in the world of finance. Behavioral Finance: What Everyone Needs to KnowR provides an overview of common shortcuts and mistakes people make in managing their finances. It covers the common cognitive biases or errors that occur when people are collecting, processing, and interpreting information. These include emotional biases...

The paper aims to study the growth and evolution of finance, as well as how the evolution of  finance theories aids investors in decision-making. The traditional finance model's perfect  mobility and rationality fail to predict the economic events, dot-com bubble, and the European debt crisis. These economic disasters provide the foundation for the development of behavioral finance. Psychology and finance are merged into behavioral finance. It defies the traditional  financial premise. The field provides unique insights into financial and investment decision making models. Behavioral finance a...

Introduction. Under the modern conditions of the Ukrainian society democratization and the reform of financial decentralization, the problems associated with increasing the effectiveness of the interaction of civil society and public authorities, primarily in the context of the modernization of public finance management in Ukraine, have been significantly updated. Therefore, the development of the methodological foundations of research in the field of public finance with the help of the latest approaches is highly demanded in the current domestic realities. One of such approaches is the applic...

The results of this research show that digital finance and financial literacy positively affect the MSMEs financial behavior, however, managerial biases does not affect the MSMEs financial behavior.

Introduction. At the end of the 20th century in the arsenal of traditional economic theory, there were not enough means by which it was possible to explain the not always rational behavior of economic subjects, which prompted the emergence of the concept of behavioral finance as a new direction of financial education. The subject of research of this concept was primarily the impact of emotional, cultural, psychological, social and other factors on the making of financial decisions by household members. Therefore, the use of the findings of the concept of behavioral finance in modern scientific...

Article History

Seit über 50 Jahren dominiert die neoklassische Kapitalmarkttheorie unser Verständnis für die Abläufe an Finanzmärkten. Sie hat eine Vielzahl von Theorien und Konzepten hervor gebracht und basiert auf der Annahme eines streng rationalen Homo Oeconomicus. Das vorliegende Buch möchte Studierenden und Praktikern die Türe öffnen zu einer neu entstehenden, verhaltenswissenschaftlichen Sicht auf die Finanzmärkte in der ein realitätsnäherer Homo Oeconomicus Humanus an den Märkten agiert. Er setzt bei der Entscheidungsfindung begrenzt rationale Heuristiken ein und lässt sich von emotionalen Einflüsse...

Behavioral Finance

Behavioral science has made a considerable contribution to finance. To gain an understanding of the scientific contributions emerging from all fields of finance with a behavioral perspective, this paper reviews the content of the major journal dedicated to behavioral finance, the Journal of Behavioral and Experimental Finance (JBEF), since its foundation 8 years ago. For this purpose, we employ bibliometrics and content analysis to shed light on the publication trends and intellectual structure of the JBEF, obtaining numerous intriguing findings. First, the JBEF is still a young journal, and i...

This article analyzes 31 mutual funds whose portfolio construction methodologies employ aspects of behavioral finance. The assets of the mutual funds in the study were valued at approximately US$ 16 billion as of August 2009. Major findings of the authors include the following. First, evidence exists of a strong seasonality effect among behavioral funds. Second, behavioral fund managers exhibit an inability to predict equity market reversals due, in large part, to their willingness to attempt to benefit from trend momentum. Third, they have superior performance during bull market periods vis-a...

Behavioral finance studies the application of psychology to finance, with a focus on individual-level cognitive biases. I describe here the sources of judgment and decision biases, how they affect trading and market prices, the role of arbitrage and flows of wealth between more rational and less rational investors, how firms exploit inefficient prices and incite misvaluation, and the effects of managerial judgment biases. There is need for more theory and testing of the effects of feelings on financial decisions and aggregate outcomes. Especially, the time has come to move beyond behavioral fi...

Behavioral finance studies the application of psychology to finance, with a focus on individual-level cognitive biases. I describe here the sources of judgment and decision biases, how they affect trading and market prices, the role of arbitrage and flows of wealth between more rational and less rational investors, how firms exploit inefficient prices and incite misvaluation, and the effects of managerial judgment biases. There is need for more theory and testing of the effects of feelings on financial decisions and aggregate outcomes. Especially, the time has come to move beyond behavioral fi...

Noting that, in recent years, dozens of academic articles have been written on the subject of behavioral finance, the authors first propose a brief review of the literature and argue that its main message is that behavioral factors affect virtually every aspect of finance—from prices of individual stocks to absolute returns and from individual retirement planning to investor confidence. Yet, they identify a void with respect to discussions as to how active portfolio managers have long applied behavioral finance to the investment process. They go on to explain some market anomalies created as a...

Finance is in the midst of a paradigm shift, from a neoclassical based framework to a psychologically based framework. Behavioral finance is the application of psychology to financial decision making and financial markets. Behavioralizing finance is the process of replacing neoclassical assumptions with behavioral counterparts. This volume surveys the literature in behavioral finance, and identifies both its strengths and weaknesses. In doing so, it identifies possible directions for behavioralizing the frameworks used to study beliefs, preferences, portfolio selection, asset pricing, corporat...

Behavioral finance began as an attempt to understand why financial markets react inefficiently to public information. One stream of behavioral finance examines how psychological forces induce traders and managers to make suboptimal decisions, and how these decisions affect market behavior. Another stream examines how economic forces might keep rational traders from exploiting apparent opportunities for profit. Behavioral finance remains controversial, but will become more widely accepted if it can predict deviations from traditional financial models without relying on too many "ad hoc" assumpt...

© 2018, McGraw-Hill EducationBehavioural finance has come a long way. During the nascent years of behavioural finance, advocates of traditional or standard finance often looked askance at those esp...

This review paper examines the intersection of behavioral finance and financial inclusion, offering a conceptual framework to address the behavioral barriers hindering access to formal financial services. Through an analysis of key behavioral factors—including risk perception, overconfidence, present bias, and social norms—and an evaluation of existing interventions, the paper highlights the complexities of financial decision-making and the challenges of expanding financial inclusion. The proposed framework outlines intervention strategies to promote positive financial behaviors and empower in...

This chapter provides an overview of household finance. The first part summarizes key facts regarding household financial behavior, emphasizing empirical regularities that are inconsistent with the standard classical economic model and discussing extensions of the classical model and explanations grounded in behavioral economics that can account for the observed patterns. This part covers five topics: consumption and savings, borrowing, payments, asset allocation, and insurance. The second part addresses interventions that firms, governments, and other parties deploy to shape household financi...

Purpose This paper aims to give a brief review on behavioral economics and behavioral finance and discusses some of the previous research on agents' utility functions, applicable risk measures, diversification strategies and portfolio optimization. Design/methodology/approach The authors also cover related disciplines such as trading rules, contagion and various econometric aspects. Findings While scholars could first develop theoretical models in behavioral economics and behavioral finance, they subsequently may develop corresponding statistical and econometric models, this finally inclu...

In this paper, we explain main concepts of Prospect Theory and Cumulative Prospect Theory within the rational dynamic asset pricing framework. We derive option pricing formulas when asset returns are altered by a generalized Prospect Theory value function or a modified Prelec’s weighting probability function. We introduce new parametric classes for Prospect Theory value functions and probability weighting functions consistent with rational dynamic pricing theory. After the behavioral finance notion of “greed and fear” is studied from the perspective of rational dynamic asset pricing theory, we...

This chapter explored the development of behavioral finance theories from the traditional finance theories in detail by exploring the importance human psychology in investment decisions.

According to traditional finance, investors with rational behaviors examine risk and return before making a decision to obtain maximum profit. However, the exploration of the behavioral path results in deciphering the emotions of participants in the financial markets. The purpose of this work is to examine the role of the psychological theory. The aim is to see how the psychological attractions of actors have been able to acquire a central place in finance, giving rise to behavioral finance, which allows a deeper understanding of investment in the financial markets. This finance is not just a ...

Purpose: The paper aims at systematic and critical evaluation of the research papers for the past 21 years and to analyze the year-wise contribution of different journals and countries’ contributions in the domain of behavioral finance. Methodology: The research was based on searching keywords like behavioral finance, psychological biases, investors’ behavior, behavioral biases, and investors’ decision making in the electronic databases of Emerald, Scopus, and Taylor & Francis Online. The survey covers a period of 21 years from 2000 to 2020 and with a total of 86 articles. Findings: The survey...

Conventional and modern finance is related to various theories and concepts that has done respectable job in financial market in providing guidance for strategic financial decisions. Among all, emerging behavior finance has come up with psychological and sociological issues that affects the financial choices and are often ignored by modernized financial theories. This paper will elaborate the concept of behavior finance and its relation with Efficient Market Hypothesis. The paper helps us to known that the loopholes in EMH gave birth to behavior finance but due to lack of clarity of its usage ...

INTRODUCTION Much of what is known about finance and investments has come from the study of economics. Classic economics assumes that people are rational when they make economic or financial decisions. “Rational” means that people respond to incentives because their goal is always to maximize benefit and minimize costs. Not everyone shares the same idea of benefit and cost, but in a market with millions of participants, there tends to be some general consensus. This belief in rationality leads to the idea of market efficiency. In an efficient market, prices reflect “fundamental value” as appra...

Behavior finance is hot problem in financial researches. Behavior finance is different from classics finance considers investor's psychology. It has been a new method. This article summarizes about background, history and theory of behavior finance.

Behavioral finance is built on the framework of standard finance but supplies a replacement for standard finance as a descriptive theory. Behavioral finance reflects a different model of human behavior and is constructed of different components—prospect theory, cognitive errors, problems of self-control, and the pain of regret. These components help make sense of the world of finance—including investor preferences, the design of modem financial products, and financial regulations—by making sense of normal investor behavior.This presentation comes from the Improving the Investment Decision-Maki...

Behavioral finance questions and challenges the traditional finance,but it does not attempt to completely overthrow past theories, only to improve research ideas and methods so as to make it more credible and effective.

By the end of 1980s, Efficient Market Hypothesis(EMH) and the rationality were the main financial studies and researches basis . According to The efficient market hypothesis (EMH) stock prices fully reflect all available information in the market, but at the end of 1980s, January effect , the month days effect, bubbles ,the transactions of financial firms for the price more than Net Asset Value (NAV) , size effect, the prediction power by financial ratio, Initial Public Offering (IPO) effect, over and under reaction, mean reversion, cause to make new point of view in finance which was called B...

In the paper, we put some foundations for studying asset pricing and finance as a stochastic and behavioral process. In such process, preferences and psychology of agents represent the most important factor in the decision-making of people. Individuals have their own ways of acquiring the information they need, how to deal with them and how to make predictions and decisions. People usually also do not behave consistent in time, but learn. Therefore, in order to understand the behavior on the markets, a new paradigm is needed.

This paper represents a starting point in the presentation of thethree types of stock-market analysis: the technical analysis, the fundamental analysis and the behavioral finance. The fundamental analysis consists in the assessment of the financial and economic status of the company, together with the context and macroeconomic environment where it activates. The technical analysis deals with the demand and supply of securities and the evolution of their trend on the market, using a range of graphics and charts to illustrate the market tendencies for the quick identification of the best moments...

Behavioral finance models often rely on a concept of individual investors who are prone to judgment and decision-making errors. This article provides a brief introduction of behavioral finance which encompasses research that drops the traditional assumptions of expected utility maximization with rational investors in efficient markets. The article also reviews prior research and extensive evidence about how psychological biases affect investor behavior and prices. The paper found that the most common behavior that most investors do when making investment decision are (1) Investors often do not...

Tulisan ini mengulas perkembangan keuangan keperilakuan ( behavioral finance ) yang semakin pesat setelah terjadi krisis keuangan di Amerika Serikat pada Desember 2007 hingga Juni 2009, yang dampaknya dirasakan perbankan dan pasar modal seluruh dunia. Behavioral finance pada dasarnya adalah sebuah pendekatan komprehensif dan kohesif yang mengombinasikan analisis fundamental, teknikal, dan analisis sentimen dan psikologi dari pelaku pasar.  Pendekatan behavioral mengalami perkembangan yang amat pesat sebab pendekatan yang selama ini digunakan untuk pengambilan keputusan oleh investor dianggap t...

Managers and corporate directors need to recognize two key behavioral impediments that obstruct the process of value maximization, one internal to the firm and the other external. I call the first obstruction behavioral costs. Behavioral costs, like agency costs, tend to prevent value creation. Behavioral costs are the costs associated with errors that people make because of cognitive imperfections and emotional influences. The second obstruction stems from behavioral errors on the part of analysts and investors. These errors can create gaps between fundamental values and market prices. When t...

The purpose of this study is to know the buying behavior of an individual for different investment avenues. Investing is fundamental to accomplish your objectives. It is the best way to improve your future. By making ventures, you are additionally keeping and amassing a corpus for later. Aside from that, making regular investments compels you to save an aggregate routinely, subsequently assisting you with imparting a financial discipline over the long haul. The influence of compounding additionally aids abundance creation. Putting is further useful in gathering future objectives like buying a ...

The principal purpose of this study is to piece together the important development and contributions by efficient market hypothesis, bounded rationality, behavioral finance, neurofi-nance, and the recently introduced adaptive market hypothesis. In the process the author will review the selected literature so that they can be linked together for further consideration and development. When monthly and daily data for S&P 500, DJIA, and NASDAQ indexes were analyzed from 1971 to 2005, the author found long string of positive and significant autocorrelations and great volatility, which were not cons...

Flexing or a narcissistic behavior by showing off the wealth its really happened a lot lately on social media. Flexing is an interesting topic of conversation among the public. Sometimes flexing is the behavior to made a perspectives done by fake rich people. This study is aims to determine the flexing behavioral on Islamic economics perspective. The method in this study is qualitative, with the analysis on a phenomenological approach. In this study it was found that flexing is prohibited in Islam Economic perspective. Flexing is done by fake rich people to show their existence or to gain reco...

Behavioral finance has emerged from the divergences observed to explain and address the traditional theories of finance and serves as supplement to classical finance by introducing behavioral aspects to decision‐making. This study provides academics with a comprehensible and complete synopsis of the evolution of behavioral finance, as well as critical insight is provided. The synopsis was based on the search for publications in Web of Science (WoS) and Scopus and the use of R, Gephi and Tree of Science ‐ToS‐ software, using citation analysis, graphos and classification analysis. The results sh...

This project is to gather empirical data on the topic to gain a better understanding of how financial technology, or Fintech, affects the financial behavior of micro, small, and medium-sized firms (MSMEs). 110 MSMEs spread over West Jakarta made up the sample in 2023. As part of the data gathering method, a random sample questionnaire with a 5-point Likert scale was created using the online tool Google Forms. The Structural Equation Modeling (SEM) model was applied to the data using Partial Least Squares (PLS) software. The results of the study show that financial inclusion and financial techn...

In this paper, we tray answer the big question is, what is a behavioral finance? This paper reviews some side in behavioral finance topic: Behavioral Finance Battle, history of behavioral finance, Economic Utility Theory, Prospect Theory, A Behavioral Approach to Efficient Portfolio Formation & Behavioral Portfolio Theory.

The textbook is devoted to behavioral economics, a popular modern field of economics. Behavioral economics, as a discipline that arose at the intersection of economic theory and psychology, is of undoubted interest to both economics students and a wide audience. The main concepts that form the analytical foundation of behavioral economics are considered, as well as the areas of its application — behavioral finance, consumer behavior, choice architecture, etc. Meets the requirements of the latest generation of federal state educational standards for higher education. For the preparation of st...

Die Autoren schlagen zunächst den Bogen von der neoklassischen Sicht der Finanzmärkte zur Behavioral Finance. Anschließend werden spekulative Blasen als Anzeichen für begrenzte Rationalität ausführlich vorgestellt. Die Anlageentscheidungen an Wertpapiermärkten werden entsprechend ihrer Risiko-/Renditeschädlichkeit eingeordnet. Abschließend werden Beispiele aus dem Wealth Management und Corporate Governance diskutiert sowie ein Blick auf aktuelle Entwicklungen der Neuro-Finance und Emotional Finance geworfen. Zur Neuauflage: Das Grundkonzept des Buches bleibt unverändert. Es richtet sich nach ...

The purpose of this paper is to detect quantitatively the existence of anchoring bias among financial analysts on the Tunisian stock market. Both non-parametric and parametric methods are used.,Two studies have been conducted over the period 2010–2014. A first analysis is non-parametric, based on observations of the sign taking by the surprise of result announcement according to the evolution of earning per share (EPS). A second analysis uses simple and multiple linear regression methods to quantify the anchor bias.,Non-parametric results show that in the majority of cases, the earning per sha...

Behavioral Corporate Finance provides new and testable explanations for long-standing corporate-finance puzzles by applying insights from psychology to the behavior of investors, managers, and third parties (e. g., analysts or bankers). This chapter gives an overview of the three leading streams of research and quantifies publication output and trends in the field. It emphasizes how Behavioral Corporate Finance has contributed to the broader field of Behavioral Economics. One contribution arises from the identification of biased behavior (also) in successful professionals, such as CEOs, entrep...

We often hear that behavioral finance is nothing more than a collection of stories about irrational people—that it lacks the unified structure of standard finance. Yet today’s standard finance is no longer unified because wide cracks have opened between its theory and the evidence. The first generation of behavioral finance attempted to fill the cracks in standard finance largely by accepting its notions of investors as rational, yet describing investors as irrational and misled by cognitive and emotional errors. The second generation of behavioral finance described briefly here and in detail ...