This chapter provides an overview of the emerging cognitive and emotional themes of behavioral finance that influence individual behavior. The behavioral finance perspective of risk incorporates both qualitative (subjective) and quantitative (objective) aspects of the decision-making process. An...

Financial and investment professionals along with their clients reveal a wide array of psychological biases that can result in flawed judgments and decisions. Understanding these biases is important for these professionals to ensure their clients are receiving the best advice and information....

The notion of risk encompasses a wide range of meanings across different disciplines, notably the social sciences and business administration fields. Within academic finance, the focal point of traditional (or standard) finance researchers involves the objective nature of risk. This traditional...

Investor behaviour often deviates from logic and reason, and investors display many behaviour biases that influence their investment decision-making processes. The authors describe some common behavioural biases and suggest how to mitigate them

This chapter focuses on the attitude of investors toward financial gains and losses and their decisions on wealth allocation, and how these changes are subject to behavioral factors. The focal point is the integration of behavioral elements into the classic portfolio optimization. Individual...

Asset allocation and portfolio diversification decisions have important welfare and policy implications. This chapter reviews studies that examine three key aspects of financial investing: participation in stock markets, portfolio diversification, and trading behavior. Standard finance theory...

Health literacy is the ability to obtain, process, and understand basic health information needed to make appropriate health decisions and follow instructions for treatment. Financial literacy is its equivalent in the financial domain, facilitating decisions on investments, retirement, health...

Religion has a major impact on people's daily life and is closely connected with their economic condition. The purpose of this chapter is to discuss the connection between religion and economic factors and to show how religion affects investment and financing decisions. It focuses on this...

In contrast to the assumption of standard economic theories, human beings cannot always make rational investment and trading decisions. Thus, psychological explanations are needed to shed light on the complexity of actual decision-making processes. The purpose of this chapter is to provide an...

This chapter attempts to answer the question, “What motivates people and can they be helped to achieve life satisfaction?” It transitions from classical economic theory to behavioral economics, which includes the behavioral life cycle hypothesis, and on to humanistic thoughts. Each theory...