Chapter 2: The Financial Psychology of Players, Services, and Products
Financial Behavior: Players, Services, Products, and Markets. H. Kent Baker, Greg Filbeck, and Victor Ricciardi, editors, 23-41. New York, NY: Oxford University Press, 2017.
Posted: 5 Jun 2017
Date Written: June 1, 2017
Abstract
This chapter provides an overview of the emerging cognitive and emotional themes of behavioral finance that influence individual behavior. The behavioral finance perspective of risk incorporates both qualitative (subjective) and quantitative (objective) aspects of the decision-making process. An emerging subject of research interest and investigation in behavioral finance is the inverse (negative) relation between perceived risk and expected return (perceived return). The chapter highlights important topics such as representativeness, framing, anchoring, mental accounting, control issues, familiarity bias, trust, worry, and regret theory. It also examines the role of negative affective reactions on financial decisions. A host of biases that depend on specific aspects of the financial product or investment service influence the judgment and decision-making process of most financial players.
Keywords: behavioral finance, behavioural finance, risk perception, perceived return, biases, negative emotions, worry
JEL Classification: A12, D81, G00, G30, G10, M00, M10, M41
Suggested Citation: Suggested Citation