Behavioral Finance

The Coming of Age

The area of behavioral finance, though relatively young, has matured and spread beyond its initial objectives: to demonstrate the fallibility of the efficient market hypothesis, to shake the belief in the ubiquity of rational decision making, and to convince the finance world of the importance of psychological biases in decision making. The success of the field in meeting its goals, however, has called into question its continued relevance. Behavioral finance is thus currently at a crossroads, and researchers need to decide which way they should turn for the area to continue to thrive and to meaningfully contribute to financial knowledge.

This collection of papers deals with rarely-explored topics to point at new directions that behavioral finance should explore to maintain its viability, along with contributions to traditional topics. Some of these topics include innovations, the psychology of policy-makers, biases of peer-to-peer market participants, the behavior and motivation behind corporate social responsibility, and the design of exchanges. Additionally, well-known topics such as the disposition effect, slow and fast decisions and the availability heuristic are revisited, and surprising new findings are presented.

By opening the field to novel avenues of discussion, this book addresses the future of behavioral finance and its transition into a new era.

Contents:

• Behavioral Finance 2.0:

  • A Second Generation Behavioral Finance (Meir Statman)

• Rationality that Important?:

  • New Governance for Entrepreneurship, Innovation and Startups: Behavioral Finance to the Rescue (Jaime Amsel)
  • Time is Money: The Advantages of Quick and Intuitive Financial Decision-Making (Lidor Krava, Shahar Ayal and Guy Hochman)
  • Optimal Asset Allocation with Heterogeneous Persistent Shocks and Myopic and Intertemporal Hedging Demand (Domenica Di Virgilio, Fulvio Ortu, Federico Severino and Claudio Tebaldi)
  • Adaptive Sovereign Bond Investment Strategies During Financial Crises: An Experiment with Financial Professionals (Michal Paserman)

• Behavioral Macro-Finance:

  • A Survey of Behavioral Macro-Finance (Na Young Park)
  • Market Architecture and Global Exchange Efficiency: One Design Need Not Fit All Stock Sizes (Peter L Swan and Joakim Westerholm)
  • International Financial Contagion During the Subprime Crisis: Evidence from UK Financial Markets (Zijun Liu, Yang Zhou and Zhiping Zhou)
  • Behavioral Monetary Policymaking: Economics, Political Economy and Psychology (Donato Masciandaro and Davide Romelli)
  • The Relation between Executive Compensation and Corporate Social Responsibility (Ivan Brick, Oded Palmon and Itzhak Venezia)

• Classical Biases Revisited:

  • Behavioral Biases in Peer-to-Peer (P2P) Lending (Shahar Ayal, Daphna Bar-Haim and Moran Ofir)
  • Psychological Aspects of Large Stock Price Changes (Andrey Kudryavtsev)
  • The Effect of Gender Differences on the Emergence of the Disposition Effect (Ori Be'eri, Haim Kedar-Levy and Moty Amar)
  • Is the Early Bird Too Early? Looking for Evidence of the Disposition Effect in the Emerging Markets of Modern and Contemporary Chinese Art (Yevgeny Mugerman and Ada Elkin)

Readership: Graduate level students and academics of finance, decision sciences, corporate finance and investments.
Key Features:

• New ideas concerning the future of behavioral finance and its transition into a new era, behavioral finance 2.0, are provided
• The book offers new insights and novel points of view on topics traditional behavioral finance paid only little attention to. Among these issues the reader could find: innovations, the psychology of policy-makers, biases of peer-to-peer markets participants, the behavior and motivation behind corporate social responsibility and the design of exchanges
• Some well-known topics in behavioral finance such as the disposition effect, slow and fast decisions and the availability heuristic are revisited and interesting/surprising new findings are presented