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What Decision Neuroscience Teaches Us About Financial Decision Making

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  • Peter Bossaerts

    ()
    (Division of the Humanities and Social Sciences, California Institute of Technology, Pasadena, California 91125; Ecole Polytechnique F�d�rale, CH-1015 Lausanne, Switzerland)

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    Abstract

    Financial decision making is the outcome of complex neurophysiological processes involving, among others, constant re-evaluation of the statistics of the problem at hand, balancing of the various emotional aspects, and computation of the very value signals that are at the core of modern economic thinking. The evidence suggests that emotions play a crucial supporting role in the mathematical computations needed for reasoned choice, rather than interfering with it, even if emotions (and their mathematical counterparts) may not always be balanced appropriately. Decision neuroscience can be expected in the near future to provide a number of effective tools for improved financial decision making.

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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev.financial.102708.141514
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    Bibliographic Info

    Article provided by Annual Reviews in its journal Annual Review of Financial Economics.

    Volume (Year): 1 (2009)
    Issue (Month): 1 (November)
    Pages: 383-404

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    Handle: RePEc:anr:refeco:v:1:y:2009:p:383-404

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    Postal: Annual Reviews 4139 El Camino Way Palo Alto, CA 94306, USA
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    Related research

    Keywords: neuroeconomics; experimental finance; risk; emotions;

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    Cited by:
    1. Cary Frydman & Nicholas Barberis & Colin Camerer & Peter Bossaerts & Antonio Rangel, 2012. "Using Neural Data to Test a Theory of Investor Behavior: An Application to Realization Utility," NBER Working Papers 18562, National Bureau of Economic Research, Inc.
    2. Kuhnen, Camelia M., 2012. "Asymmetric learning from financial information," MPRA Paper 39412, University Library of Munich, Germany.
    3. Alain Cohn & Jan Engelmann & Ernst Fehr & Michel Maréchal, 2013. "Evidence for countercyclical risk aversion: an experiment with financial professionals," UBSCENTER - Working Papers 004, UBS International Center of Economics in Society - Department of Economics - University of Zurich.
    4. Dimitrios Bisias & Mark Flood & Andrew W. Lo & Stavros Valavanis, 2012. "A Survey of Systemic Risk Analytics," Annual Review of Financial Economics, Annual Reviews, vol. 4(1), pages 255-296, October.

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