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What can behavioural finance teach us about finance?

Author

Listed:
  • Werner DeBondt
  • William Forbes
  • Paul Hamalainen
  • Yaz Gulnur Muradoglu

Abstract

Purpose - The paper draws on the key themes raised at a Round Table discussion on behavioural finance attended by academics and practitioners. The paper provides a background to the key aims of behavioural finance research and the development of the discipline over time. The purpose of this paper is to indicate some future research issues on behavioural finance that emanate from the financial crisis and highlight areas of mutual benefit to both behavioural finance academics and the finance industry so as to encourage a creative cross‐fertilisation. Design/methodology/approach - The paper draws on a Round Table discussion on behavioural finance that was organized by the Behavioural Finance Working Group, the Centre for the Study of Financial Innovation and Financial Services Knowledge Transfer Network. Findings - The paper highlights numerous benefits that behavioural finance research can contribute to the financial industry, but at the same time there is an evident discrepancy between the academic and the professional world when it comes to utilising behavioural finance research. Practical implications - The paper highlights several areas where behavioural finance can contribute significant benefits to a wide array of aspects of the finance industry. Social implications - The paper seeks to inform behavioural finance issues so as to encourage collaboration between the academic world and finance practitioners. In so doing, the paper aims to encourage a greater awareness of individual decision‐making frames and heuristics and how industry can apply these concepts to improve the allocation of finance products to society. Originality/value - The paper brings together a wide array of finance professionals and academics to encourage greater collaboration and mutual respect of each others interest in and uses for behavioural finance.

Suggested Citation

  • Werner DeBondt & William Forbes & Paul Hamalainen & Yaz Gulnur Muradoglu, 2010. "What can behavioural finance teach us about finance?," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 2(1), pages 29-36, April.
    • Handle: RePEc:eme:qrfmpp:v:2:y:2010:i:1:p:29-36
    DOI: 10.1108/17554171011042371
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    References listed on IDEAS

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    1. Xavier Gabaix & David Laibson, 2018. "Shrouded attributes, consumer myopia and information suppression in competitive markets," Chapters, in: Victor J. Tremblay & Elizabeth Schroeder & Carol Horton Tremblay (ed.), Handbook of Behavioral Industrial Organization, chapter 3, pages 40-74, Edward Elgar Publishing.
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    Cited by:

    1. Leković Milјan, 2020. "Cognitive Biases as an Integral Part of Behavioral Finance," Economic Themes, Sciendo, vol. 58(1), pages 75-96, March.
    2. Kearney, Colm, 2012. "Emerging markets research: Trends, issues and future directions," Emerging Markets Review, Elsevier, vol. 13(2), pages 159-183.
    3. Aggarwal, Raj & Kearney, Colm & Lucey, Brian, 2012. "Gravity and culture in foreign portfolio investment," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 525-538.
    4. Nuzula, Nila Firdausi & Sisbintari, Ika & Suhadak, & Handayani, Siti Ragil, 2019. "The use of technical analysis, source of information and emotion and its influence on investment decisions," Journal of Behavioral and Experimental Finance, Elsevier, vol. 22(C), pages 51-56.
    5. Shanmuganathan, Manchuna, 2020. "Behavioural finance in an era of artificial intelligence: Longitudinal case study of robo-advisors in investment decisions," Journal of Behavioral and Experimental Finance, Elsevier, vol. 27(C).
    6. Michelle Salmona & Dan Kaczynski & Tom Smith, 2015. "Qualitative theory in finance: Theory into practice," Australian Journal of Management, Australian School of Business, vol. 40(3), pages 403-413, August.

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