Trading psychology offers a unique look at unexpected factors in risk decisions made in uncertain circumstances. Traders, by definition, constantly make judgment calls and face a roller coaster of positive and negative feedback via the authority figure of price. Emanating from the historically...

Personality captures a person's essence. Understanding one's personality helps explain and predict the decisions an individual makes and what a person will do. This chapter focuses on the predominant structural model of personality — the Five-Factor Model — which encapsulates personality...

Financial literacy is a form of human capital that includes knowledge and skills related to personal finances including mathematical ability, knowledge of financial instruments and financial theory, and the ability to apply knowledge effectively. This chapter reviews how financial literacy has...

Financial counseling is generally conceptualized as a short-term process concerned with helping people change their financial behavior through applied education and guidance. Counseling typically involves helping people clarify issues, explore options, assess alternatives, make decisions,...

This chapter provides a critical review of behavioral economic approaches to decision-making with a focus on the thinking processes of investors. It discusses the bounded rationality approach to decision-making as compared to the errors and biases approach for better understanding...

The purpose of this chapter is to compare and contrast traditional and behavioral finance. In traditional finance, which has been the dominant paradigm for several decades, investors make rational choices leading to maximizing expected utility. The fundamental issues of traditional finance are...

Since the mid-1970s, hundreds of academic studies have been conducted in risk perception-oriented research within the social sciences (e.g., nonfinancial areas) across various branches of learning. The academic foundation pertaining to the quot;psychological aspectsquot; of risk perception...

Financial professionals and their clients exhibit a wide collection of behavioral biases that many times result in imperfect judgments and outcomes. Understanding these cognitive and affective factors are important for financial planners and advisors to ensure their clients are receiving the...

By linking sell-side equity analysts to their deed records and LinkedIn profiles, I show that analysts with higher exposure to negative wealth shocks issue more pessimistic and less accurate forecasts. The effects are stronger when analysts have higher leverage in their homes and face career...

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...