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Neurofinance and investment behaviour

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  • Shalini Kalra Sahi

Abstract

Purpose - The purpose of this paper is to present a review as well as a synthesis of the extant literature in the field of Neurofinance. The paper has been divided into eight parts. The first and second parts introduce the paper and dwell upon the brain functions in financial decisions. Part three presents the origin of Neurofinance and part four explains the difference between traditional finance, behavioural finance and neurofinance. Part five and six of the paper look into the research studies in Neurofinance and their application. Part seven gives a brief discussion on the limitations of neurofinance studies and part eight gives the conclusion. Design/methodology/approach - The existing body of academic literature pertinent to the domain of Neurofinance was reviewed so as to provide an integrated portrayal and synthesis of the current level of knowledge in this field. This paper covers the insights on the subject for developing a deeper understanding of the investor's psychology. Findings - Neurofinance is a very young discipline. It tries to relate the brain processes to the investment behaviour. Most of the researches in the domain of neurofinance focus on trading behaviour. It would be interesting to explore the workings of the brain for other investment behaviours too like personal financial planning decisions, etc. Originality/value - Neurofinance is emerging as an alternate field of study and practice and this paper is an attempt to look at the development of Neurofinance and its role in developing a better understanding of the investor behaviour.

Suggested Citation

  • Shalini Kalra Sahi, 2012. "Neurofinance and investment behaviour," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 29(4), pages 246-267, September.
  • Handle: RePEc:eme:sefpps:v:29:y:2012:i:4:p:246-267
    DOI: 10.1108/10867371211266900
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    Citations

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    Cited by:

    1. Ardalan, Kavous, 2018. "Neurofinance versus the efficient markets hypothesis," Global Finance Journal, Elsevier, vol. 35(C), pages 170-176.
    2. Dorow, Anderson & da Costa, Newton & Takase, Emilio & Prates, Wlademir & Da Silva, Sergio, 2018. "On the neural substrates of the disposition effect and return performance," Journal of Behavioral and Experimental Finance, Elsevier, vol. 17(C), pages 16-21.
    3. Pereira Reichhardt, JoaquĆ­n & Iqbal, Tabassum, 2014. "Investment Decisions: Are we fully-Rational?," MPRA Paper 57686, University Library of Munich, Germany.
    4. Zamri Ahmad & Haslindar Ibrahim & Jasman Tuyon, 2017. "Institutional investor behavioral biases: syntheses of theory and evidence," Management Research Review, Emerald Group Publishing Limited, vol. 40(5), pages 578-603, May.

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