Financial Advertising in the Second Generation of Behavioral Finance

24 Pages Posted: 10 Aug 2017

See all articles by Meir Statman

Meir Statman

Santa Clara University - Department of Finance

Date Written: August 9, 2017

Abstract

Financial economists writing about financial adverting often describe them as fluff at best and misleading or fraudulent at worst. This description typifies the first generation of behavioral finance that described people as irrational, misled by ads into cognitive and emotional errors. The second generation of behavioral finance describes people as normal. It acknowledges the full range of people’s normal wants and distinguishes wants from errors. Some financial ads exploit errors, whereas others cater to wants.

Our wants include the utilitarian, expressive and emotional benefits of riches and protection from poverty, nurturing our children and families, playing games and winning, staying true to our values, gaining respect and high social status, promoting fairness, paying no taxes, and more.

Keywords: behavioral finance, advertising, normal wants, cognitive and emotional errors

JEL Classification: G1, G2, G4

Suggested Citation

Statman, Meir, Financial Advertising in the Second Generation of Behavioral Finance (August 9, 2017). Available at SSRN: https://ssrn.com/abstract=3015903 or http://dx.doi.org/10.2139/ssrn.3015903

Meir Statman (Contact Author)

Santa Clara University - Department of Finance ( email )

500 El Camino Real
Santa Clara, CA 95053
United States
408-554-4147 (Phone)
408-554-4029 (Fax)

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