Economics is increasingly adopting the methodological standards and procedures of the natural sciences. The paper analyzes this 'naturalistic turn' from the philosophical perspective on naturalism, and I discuss the implications for the field of finance. The theory of finance is an interesting...

From the viewpoint of the independence axiom of expected utility theory, an interesting empirical dynamic choice problem involves the presence of a “global risk,” that is, a chance of losing everything whichever safe or risky option is chosen. In this experimental study, participants have to...

We provide a preference-based rationale for endogenous overconfidence. Horizon-dependent risk aversion, combined with a possibility to forget, can generate overconfidence and excessive risk taking in equilibrium. An "anxiety prone" agent, who is more risk-averse to imminent than to distant...

The following paper is a theoretical introduction of the misinformation effect to behavioural finance. The misinformation effect causes a memory report regarding an event or particular knowledge to become contaminated with misleading information from another source. The paper aims to describe...

This survey introduces and reviews the field of behavioral finance. It outlines the traditional finance approach, which builds upon rational acting investors, its assumptions, and its shortcomings. Moreover, it surveys the main findings from psychology and sociology that contrast with this...

The topic of risk incorporates a variety of definitions within different fields such as psychology, sociology, finance, and engineering. In academic finance, the analysis of risk has two major perspectives known as standard (traditional) finance and behavioral finance. The central focus of...

Under the Restatement (Third) of Trusts, the prudent investor rule states that “The trustee is under a duty to the beneficiaries to invest and manage the funds of the trust as a prudent investor would, in light of the purposes, terms, distribution requirements, and other circumstances of the...

According to the Financial Times (James Wilson & Gerrit Wiesmann 12.3.2012) German investors were seeking lawsuits over the Greek debt swap, immediately after it was set in motion in March 2012. According to reports, a German law firm was preparing lawsuits against banks and the Greek state on...

Behavioral Finance researches the influence of psychology on those carrying out financial transactions as well as on the market behavior afterwards. Behavioral Finance is an interesting topic in that it helps explain why financial markets are less effective and how they are less effective. In...

Individual investor behaviour is motivated by a variety of psychological heuristics and biases. Using survey data of more than 350 individual investors, we document four important results in the context of Indian individual investor behaviour. First, investors make investment decisions based on...