Download pdf
Behavioral Finance: Bridging Psychology and Economics for Rational Financial Decisions
- 1 Sofia University, Palo Alto, USA
* Author to whom correspondence should be addressed.
Abstract
Behavioral finance bridges psychology and economics to provide insights into irrational financial decisions influenced by cognitive biases, emotions, and societal factors. This study examines personal money paradigms, cultural and societal influences, and advanced investment strategies informed by antifragile principles. Drawing examples from Taleb's Antifragile and Klontz's Financial Therapy, the paper synthesizes frameworks for aligning financial decisions with personal values and long-term goals. It emphasizes the role of cultural norms, societal scripts, and historical contexts in shaping financial behaviors. By integrating behavioral finance principles with strategies to counteract cognitive biases, such as loss aversion and overconfidence, the discussion highlights practical approaches to improving financial decision-making. Advanced strategies, including diversification, barbell approaches, and ethical investing, are explored to promote financial resilience and adaptability. This paper aims to provide a nuanced understanding of how personal and cultural dynamics intersect with behavioral finance, offering strategies for achieving sustainable and value-driven financial well-being.
Keywords
behavioral finance, cultural influences, antifragility, financial therapy, psychological economics
[1]. Kahneman, D. (2011). Thinking, fast and slow. Farrar, Straus and Giroux.
[2]. Klontz, B., Britt, S. L., Mentzer, J., & Klontz, T. (2011). Financial therapy: Theory, research, and practice. Springer.
[3]. Taleb, N. N. (2012). Antifragile: Things that gain from disorder. Random House.
[4]. Klontz, B., Kahler, R., & Klontz, T. (2008). The financial wisdom of Ebenezer Scrooge: 5 principles to transform your relationship with money. Health Communications, Inc.
[5]. Thaler, R. H., & Sunstein, C. R. (2008). Nudge: Improving decisions about health, wealth, and happiness. Penguin Books.
[6]. Crosby, D. (2018). The behavioral investor. Harriman House.
[7]. Kang, J., Martinez, C. M. J., & Johnson, C. (2021). Minimalism as a sustainable lifestyle: Its behavioral representations and contributions to emotional well-being. Sustainable Production and Consumption, 27, 802–813. https://doi.org/10.1016/j.spc.2021.02.001
[8]. De Simone, L., Klassen, K. J., & Seidman, J. K. (2022). The effect of income-shifting aggressiveness on corporate investment. Journal of Accounting and Economics, 74(1), 101491. https://doi.org/10.1016/j.jacceco.2022.101491
[9]. Halim, S. (2024). Financial planning with a purpose: Ethical considerations for personal investments. SSRN. https://ssrn.com/abstract=4845604 or http://dx.doi.org/10.2139/ssrn.4845604
[10]. Gyori, B., Purcell, W., Gyori, C., Kazakova, T., & Dain, D. (2020). Purpose-driven leadership for the 21st century: Transitioning to a purpose-first economy through the new business logic. Working Paper. UK: Leaders on Purpose.
[11]. Almansour, B. Y., Elkrghli, S., & Almansour, A. Y. (2023). Behavioral finance factors and investment decisions: A mediating role of risk perception. Cogent Economics & Finance, 11(2). https://doi.org/10.1080/23322039.2023.2239032
Cite this article
Zhu,Y. (2024). Behavioral Finance: Bridging Psychology and Economics for Rational Financial Decisions. Journal of Applied Economics and Policy Studies,14,73-76.
Data availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
Disclaimer/Publisher's Note
The statements, opinions and data contained in all publications are solely those of the individual author(s) and contributor(s) and not of EWA Publishing and/or the editor(s). EWA Publishing and/or the editor(s) disclaim responsibility for any injury to people or property resulting from any ideas, methods, instructions or products referred to in the content.
About volume
Journal：Journal of Applied Economics and Policy Studies
© 2024 by the author(s). Licensee EWA Publishing, Oxford, UK. This article is an open access article distributed under the terms and
conditions of the Creative Commons Attribution (CC BY) license. Authors who
publish this series agree to the following terms:
1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons
Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this
series.
2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published
version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial
publication in this series.
3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and
during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See
Open access policy for details).