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Financial Behavior: An Overview

By VW Staff. Originally published at ValueWalk.

“Financial Behavior: An Overview” is the introduction chapter for the book Financial Behavior: Players, Services, Products, and Markets edited by H. Kent Baker, Greg Filbeck, and Victor Ricciardi. The book provides a synthesis of the theoretical and empirical literature on the financial behavior of major stakeholders, financial services, investment products, and financial markets. The book offers a different way of looking at financial and emotional well-being and processing beliefs, emotions, and behaviors related to money. It presents important insights about cognitive and emotional biases that influence various financial decision-makers, services, products, and markets. The chapter also provides an overview of the emerging research topics covered in Financial Behavior and the abstract descriptions for the remaining 29 chapters of the book by 50 contributors.

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SUMMARY AND CONCLUSIONS


Traditional finance assumes that investors make rational decisions. Behavioral finance acknowledges the contributions of traditional finance, but also recognizes cognitive and emotional biases that result in a decision-making process that contradicts assumptions of standard finance. Behavioral finance examines the decision-making approach of individuals, including cognitive and emotional biases. Financial Behavior – Players, Services, Products, and Markets seeks to interweave the contributions of both academics and practitioners into a single review of important but selective topics related to behavioral finance.


Behavioral finance affects the investment process on both micro and macro levels. The presence of investors who are influenced by behavioral biases can result in security and market pricing that deviates substantially from intrinsic values based on traditional finance. Such decision-making frameworks can also affect financial professionals and professional – client relationships. By better understanding financial behavior, readers can distinguish the contributions of investor psychology and the role investor behavior has on influencing the types of products and services offered and the impact such behavior has on market efficiency

More from SSRN and link to PDF below

Financial Behavior: Players, Services, Products, and Markets (Financial Markets and Investments

Financial Behavior – Book Review

Financial Behavior

Financial Behavior: Players, Services, Products, and Markets (Financial Markets and Investments) by H. Kent Baker, Greg Filbeck, Victor Ricciardi

Financial Behavior: Players, Services, Products, and Markets provides a synthesis of the theoretical and empirical literature on the financial behavior of major stakeholders, financial services, investment products, and financial markets. The book offers a different way of looking at financial and emotional well-being and processing beliefs, emotions, and behaviors related to money. The book provides important insights about cognitive and emotional biases that influence various financial decision-makers, services, products, and markets. With diverse concepts and topics, the book brings together noted scholars and practitioners so readers can gain an in-depth understanding about this topic from experts from around the world.

Finance For Normal People: How Investors And Markets Behave

In today’s financial setting, the discipline of behavioral finance is an ever-changing area that continues to evolve at a rapid pace. This book takes readers through the core topics and issues as well as the latest trends, cutting-edge research developments, and real-world situations. Additionally, discussion of research on various cognitive and emotional issues is covered throughout the book. Thus, this volume covers a breadth of content from theoretical to practical, while attempting to offer a useful balance of detailed and user-friendly coverage. Those interested in a broad survey will benefit as will those searching for more in-depth presentations of specific areas within this field of study. As the seventh book in the Financial Markets and Investment Series, Financial Behavior: Players, Services, Products, and Markets offers a fresh looks at the fascinating area of financial behavior.

Reviews

Taking a Closer Look at Ken Fisher’s Research into Behavioral Finance

“This collection is now the definitive work on behavioral finance. It examines market behavior, the psychological influences on CEOs, institutional investors, traders, advisors, and their high net worth clients that create patterns in asset prices, including the crucial angle of practical applications. This is a wonderful text.” — Richard L. Peterson, M.D., CEO of the MarketPsych Group and author of Inside the Investor’s Brain

What It Takes To Make It: The Psychology Of Smart Investing

“For those who want an extension of the usual behavioral finance heuristics, Baker, Filbeck and Ricciardi expand their treatment of cognitive and emotional biases to a wide variety of tangential areas. Readers will find fascinating applications to areas as diverse as financial psychopaths and bounded rationality. This book should be of interest to financial analysts and advisors, portfolio managers, and anyone else with a strong interest in behavioral finance. Highly recommended.” — Gary Antonacci, author of Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk

“This new book has broad-based appeal as it is an invaluable behavioral finance resource to have on your bookshelf whether you are a financial planning practitioner, investment professional, individual investor or in academia as an instructor or student. Baker, Filbeck and Ricciardi have provided a de facto must-read for anyone who is interested in better understanding human behavior and its resultant impact on financial planning and investing.” — Paul Bennett, PhD, CFP®, author of The Money Navigator: The Essential Guide to Living Your Ideal Financial Life

“Those of us in the business of investing on behalf of clients are acutely aware of the way in which behavior and sentiment cloud investors’ decision-making. Financial Behavior provides a fine overview of the latest research and thinking from the evolving field of behavioral finance, with great value for audiences ranging from students and academics to investors and financial professionals.” — Gregg S. Fisher, CFA, CFP®, Founder & Head of Quantitative Research and Portfolio Strategy

“Kent Baker, Greg Filbeck and Victor Ricciardi perform an excellent service in this collection of articles that add to our knowledge of the effects of cognition and emotion on the financial choices we all make. Financial academics and practitioners would benefits greatly from reading this book.” — Meir Statman, Glenn Klimek Professor of Finance, Leavey School of Business, Santa Clara University and author of Finance for Normal People

What It Takes To Make It: The Psychology Of Smart Investing

Baker, H. Kent and Filbeck, Greg and Ricciardi, Victor, Chapter 1: Financial Behavior: An Overview (June 1, 2017). Financial Behavior: Players, Services, Products, and Markets. H. Kent Baker, Greg Filbeck, and Victor Ricciardi, editors, 3-22. New York, NY: Oxford University Press, 2017.. Available at SSRN: https://ssrn.com/abstract=2974217

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