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Review on behavioral economics and behavioral finance

Author

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  • Wing-Keung Wong

Abstract

Purpose - This paper aims to give a brief review on behavioral economics and behavioral finance and discusses some of the previous research on agents' utility functions, applicable risk measures, diversification strategies and portfolio optimization. Design/methodology/approach - The authors also cover related disciplines such as trading rules, contagion and various econometric aspects. Findings - While scholars could first develop theoretical models in behavioral economics and behavioral finance, they subsequently may develop corresponding statistical and econometric models, this finally includes simulation studies to examine whether the estimators or statistics have good power and size. This all helps us to better understand financial and economic decision-making from a descriptive standpoint. Originality/value - The research paper is original.

Suggested Citation

  • Wing-Keung Wong, 2020. "Review on behavioral economics and behavioral finance," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 37(4), pages 625-672, June.
    • Handle: RePEc:eme:sefpps:sef-10-2019-0393
    DOI: 10.1108/SEF-10-2019-0393
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    Citations

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    Cited by:

    1. Junyi Chai & Zhiquan Weng & Wenbin Liu, 2021. "Behavioral Decision Making in Normative and Descriptive Views: A Critical Review of Literature," JRFM, MDPI, vol. 14(10), pages 1-14, October.
    2. Dmitry B. Rokhlin, 2021. "Relative utility bounds for empirically optimal portfolios," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 93(3), pages 437-462, June.
    3. Tai-Yuen Hon & Massoud Moslehpour & Kai-Yin Woo, 2021. "Review on Behavioral Finance with Empirical Evidence," Advances in Decision Sciences, Asia University, Taiwan, vol. 25(4), pages 15-41, December.

    More about this item

    Keywords

    Behavioral finance; Applications; Behavioral economics; Theoretical models; Econometric and statistical models; A10; G00; G31; O32;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General
    • G00 - Financial Economics - - General - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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