Toward a theory of behavioral finance: implications from the natural sciences
Purpose – The purpose of this paper is to identify common inclusive concepts that might help define the boundaries of a general theory of behavioral finance. Design/methodology/approach – A cross disciplinary review of relevant natural and social sciences is conducted to identify common foundational concepts. Findings – The overall findings are that a general theory must include assumptions of subjective perception, indeterminacy, and a financial decision process that is both logical and affective. Practical implications – Optimal financial decisions are not possible and significant market unpredictability will continue because of the dynamic complexity associated with disequilibrium. Social implications – The current financial paradigm is based upon radically incorrect assumptions and a general theory of behavioral finance cannot arise from minor corrections to the current financial paradigm. Originality/value – This paper is the first to attempt identifying foundational attributes of a behavioral financial paradigm.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 2 (2010)
Issue (Month): 2 (October)
|Contact details of provider:|| Web page: http://www.emeraldinsight.com|
|Order Information:|| Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK|
Web: http://emeraldgrouppublishing.com/products/journals/journals.htm?id=qrfm Email:
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1251-1288.
- Freeman, Steven F., 1997. "Good decisions : reconciling human rationality, evolution, and ethics," Working papers WP 3962-97., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Bohnet, Iris & Zeckhauser, Richard, 2004.
"Trust, risk and betrayal,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 55(4), pages 467-484, December.
- Nava Ashraf & Iris Bohnet & Nikita Piankov, 2006. "Decomposing trust and trustworthiness," Experimental Economics, Springer, vol. 9(3), pages 193-208, September.
- Harlow, W. V. & Rao, Ramesh K. S., 1989. "Asset Pricing in a Generalized Mean-Lower Partial Moment Framework: Theory and Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(03), pages 285-311, September.
- Huberman, Gur, 2001. "Familiarity Breeds Investment," Review of Financial Studies, Society for Financial Studies, vol. 14(3), pages 659-80.
- Johnson, Devon & Grayson, Kent, 2005. "Cognitive and affective trust in service relationships," Journal of Business Research, Elsevier, vol. 58(4), pages 500-507, April.
- Fama, Eugene F & French, Kenneth R, 1996. " Multifactor Explanations of Asset Pricing Anomalies," Journal of Finance, American Finance Association, vol. 51(1), pages 55-84, March.
- Melissa L. Finucane & Joan L. Holup, 2006. "Risk as Value: Combining Affect and Analysis in Risk Judgments," Journal of Risk Research, Taylor & Francis Journals, vol. 9(2), pages 141-164, March.
- Luigi Guiso & Paola Sapienza & Luigi Zingales, 2008.
"Trusting the Stock Market,"
Journal of Finance,
American Finance Association, vol. 63(6), pages 2557-2600, December.
- Eckel, Catherine C. & Wilson, Rick K., 2004. "Is trust a risky decision?," Journal of Economic Behavior & Organization, Elsevier, vol. 55(4), pages 447-465, December.
- Hanoch, Yaniv, 2002. ""Neither an angel nor an ant": Emotion as an aid to bounded rationality," Journal of Economic Psychology, Elsevier, vol. 23(1), pages 1-25, February.
- Hong, Kessely & Bohnet, Iris, 2007.
"Status and distrust: The relevance of inequality and betrayal aversion,"
Journal of Economic Psychology,
Elsevier, vol. 28(2), pages 197-213, April.
- Hong, Kesseley & Bohnet, Iris, 2004. "Status and Distrust: The Relevance of Inequality and Betrayal Aversion," Working Paper Series rwp04-041, Harvard University, John F. Kennedy School of Government.
- Unser, Matthias, 2000. "Lower partial moments as measures of perceived risk: An experimental study," Journal of Economic Psychology, Elsevier, vol. 21(3), pages 253-280, June.
- S. Illeris & G. Akehurst, 2002. "Introduction," The Service Industries Journal, Taylor & Francis Journals, vol. 22(1), pages 1-3, January.
- Michael J. Cooper & Huseyin Gulen & P. Raghavendra Rau, 2005. "Changing Names with Style: Mutual Fund Name Changes and Their Effects on Fund Flows," Journal of Finance, American Finance Association, vol. 60(6), pages 2825-2858, December.
When requesting a correction, please mention this item's handle: RePEc:eme:qrfmpp:v:2:y:2010:i:2:p:100-128. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Lister)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.