Behavioral Finance: Quo Vadis?

15 Pages Posted: 9 Dec 2015

See all articles by Werner F. M. De Bondt

Werner F. M. De Bondt

DePaul University

Yaz Gulnur Muradoglu

Queen Mary University of London; City University London - Sir John Cass Business School

Hersh Shefrin

Santa Clara University - Leavey School of Business

Sotiris K. Staikouras

City University - Cass Business School; ALBA Graduate Business School

Date Written: December 3, 2015

Abstract

Behavioral finance endeavors to bridge the gap between finance and psychology. Now an established field, behavioral finance studies investor decision processes which in turn shed light on anomalies, i.e., departures from neoclassical finance theory. This paper is the summary of a panel discussion. It begins by reviewing the foundations of finance and it ends with a discussion of the future of behavioral finance and a self-critique. We describe the move from the standard view that financial decision making is rational to a behavioral approach based on judgmental heuristics, biases, mental frames, and new theories of choice under risk. A new class of asset pricing models, which adds behavioral elements to the standard framework, is proposed.

Suggested Citation

Bondt, Werner F. M. De and Muradoglu, Yaz Gulnur and Shefrin, Hersh and Staikouras, Sotiris, Behavioral Finance: Quo Vadis? (December 3, 2015). Journal of Applied Finance (Formerly Financial Practice and Education), Vol. 18, No. 2, 2008. Available at SSRN: https://ssrn.com/abstract=2698614

Werner F. M. De Bondt

DePaul University

1 East Jackson Blvd.
Chicago, IL 60604
United States

Yaz Gulnur Muradoglu

Queen Mary University of London ( email )

Francis Bancroft Building
Mile End Road
London, E1 4NS
United Kingdom

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 20 7040 0124 (Phone)
+44 20 7040 8853 (Fax)

Hersh Shefrin

Santa Clara University - Leavey School of Business ( email )

Dept. of Finance
Santa Clara, CA 95053
United States
408-554-6893 (Phone)
408-554-4029 (Fax)

Sotiris Staikouras (Contact Author)

City University - Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

ALBA Graduate Business School ( email )

Athinas Ave. & 2A Areos Str.
Vouliagmeni 166 71, Athens
Greece

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