By
Hersh Shefrin
Santa Clara University - Leavey School of Business; National Bureau of Economic Research (NBER)
Abstract
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 monograph 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, corporate finance, and financial market regulation. The intent is to provide a structured approach to behavioral finance in respect to underlying psychological concepts, formal framework, testable hypotheses, and empirical findings. A key theme of this monograph is that the future of finance will combine realistic assumptions from behavioral finance and rigorous analysis from neoclassical finance.
A great spot from Finance Professor. Thanks Jim.
More Behavioural finance at MoneyScience.
Finance Professor
Behavioural Finance Links
With over 9,000 entries, the Dictionary of Accounting and Finance covers a huge
range of terms and acronyms specifically relating to finance and accounting,
as well as more general business and commercial terms.