Behavioral Finance

The behavioral finance (FC) is the application of the Psychologie to the Finance.

The noted phenomena are very close to those concerning the application of psychology to the economy, in other words the behavioral economy (EC.), so that these two fields can be gathered.

The FC/EC. counts the through behavior and their effects on the financial markets, in the form of anomalies of price or output . The FC seeks to detect these through and anomalies of market, and if possible to use them in the strategies of placement.

She is opposed in that to the classical theory based on the HEM - assumption of Efficience of the market. She issues also reserves on a too broad use in economic theory of the traditional concept of Fonction of utility.

However, the behavioral economy cannot be confused with the analyzes of the Concurrence “impure and imperfect”, which relates to the economic structures and not the psychological aspects.

Types of through and anomalies concerned

Through behavior are:

cognitive (see Oblique cognitive), related to comprehension (framing…), with the memory (mental Anchoring…), with the mental practices (known as “Heuristic S”);

or emotional (fear, desires, admirations, repulsions, pride…) ;

individual or collective (Imitation S of group or crowd);

prophecies autoréalisatrices (it is said to me that this action thus will go up I buy, others do as much, that of it goes up, my council was right).

The anomalies of market , bearing on the prices and outputs, are varied. One can for example explain partly the phenomenon of stock exchange Tendance, bull or depression, by a continuation of collective Under-reactions and surréactions with information.

These tendencies can succeed, by domino effect and of exacerbation on levels of extreme and disproportionate prices compared to the fundamental economic ones, what is called of the financial bubble S or Krach S.

Environment of research

The studies on these subjects generally come from American researchers, either in Finance or in social Psychologie. In particular Richard Thaler and especially the prize winner of the Price of the Bank of Sweden in economic scenes in memory of Alfred Nobel, Daniel Kahneman.

Research using the methods of the experimental economy, as well as the development of the Neuroéconomie/neurofinance, allows new projections, although they are centered more on the individual behaviors or in small groups that on the phenomena of mass.

Disputes of a political nature

Certain thinkers, for much of the Interventionist S:

either draws from the existence of these inefficiences the idea that the State should accentuate its role in the economy, while restricting and by penalizing certain private initiatives. In particular when the economic behaviors create negative externalities or when they are considered to be immoral (speculation, interest rate…) ;

either brings back the economic argument to concepts of power struggle, " of intoxication" and of misinformation, and consider this approach as an attempt to save an economic theory which they consider dying woman (see the antimanuel saving in Bernard Maris).

For as much, certain aspects of Political behavioral (Theory of the public choice behavioral) relative to through cognitive of the apparatus of the State (bureaucracy, through ideological), and also of the voters in a representative system, are them also verifiable. Consequently, behavioral finance really does not appear to bring innovations in the debate which relates to the place to grant to the financial markets in the economy, since it seems to support neither the camp of the interventionists, nor that of the liberals.

See too

Internal bonds

JessX free software of Economy/experimental Finance

External bonds

behaviouralfinance.net, collection of articles academic in behavioral finance, gathered by topics and classified per many quotations
Behavioral Finances Research Initiative, Université Yale

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