Chapter 29: Practical Challenges of Implementing Behavioral Finance: Reflections from the Field
Financial Behavior: Players, Services, Products, and Markets. H. Kent Baker, Greg Filbeck, and Victor Ricciardi, editors, 542-560, New York, NY: Oxford University Press, 2017.
Posted: 14 Jun 2017
Date Written: June 1, 2017
Behavioral finance is useful only if it can be applied to help people make better decisions. This chapter offers reflections on the good, bad, and ugly of practical applications of behavioral finance in a commercial banking setting. It explores the difficulties of nonexperts experimenting with behavioral finance, and how effective applications require a unique mix of expert knowledge and the ability to effect change through a business. Principles of good applications of behavioral finance are also presented, with information on how to start using behavioral finance within an organization. The importance of senior management’s acknowledging that behavioral finance practitioners do not necessarily know the correct answer and that they will need to use randomized control trials to learn is also discussed.
Keywords: behavioral finance, behavioural finance, banking, applications, randomized control trials
JEL Classification: A12, D81, G00, G30, G10, M00, M10, M41
Suggested Citation: Suggested Citation