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Neurofinance versus the efficient markets hypothesis

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  • Ardalan, Kavous

Abstract

This paper develops the implication of neurofinance with respect to the efficient markets hypothesis. Neurofinance informs us that thinking imposes strain on the mind, in the sense that thinking is a comparatively laborious, biologically costly, and neurologically expensive cognitive process. The paper shows that people balance the costs and benefits of thinking and demonstrates mathematically that such balancing makes financial markets inefficient.

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  • Ardalan, Kavous, 2018. "Neurofinance versus the efficient markets hypothesis," Global Finance Journal, Elsevier, vol. 35(C), pages 170-176.
    • Handle: RePEc:eee:glofin:v:35:y:2018:i:c:p:170-176
    DOI: 10.1016/j.gfj.2017.10.005
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    More about this item

    Keywords

    Neurofinance; Behavioral finance; Costly thinking; Efficient markets hypothesis;
    All these keywords.

    JEL classification:

    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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