Do Emotions Benefit Investment Decisions? Anticipatory Emotion and Investment Decisions in Non-professional Investors

Increasing financial trading performance is big business. A lingering question within academia and industry concerns whether emotions improve or degrade trading performance. In this study, 30 participants distributed hypothetical wealth between a share (a risk) and the bank (paying a small, sure, gain) within four trading games. Skin Conductance Response was measured while playing the games to measure anticipatory emotion, a covert emotion signal that impacts decision-making. Anticipatory emotion was significantly associated with trading performance but the direction of the correlation was dependent upon the share’s movement. Thus, anticipatory emotion is neither wholly “good” nor “bad” for trading; instead, the relationship is context-dependent. This is one of the first studies exploring the association between anticipatory emotion and trading behaviour using trading games within an experimentally rigorous environment. Our findings elucidate the relationship between anticipatory emotion and financial decision-making and have applications for improving trading performance in novice and expert traders.

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Attitude for inclusive finance: influence of owner-managers’ and firms’ characteristics on SMEs financial decision making

Journal of Economic and Administrative Sciences ◽

10.1108/jeas-05-2018-0057 ◽

2019 ◽

Vol 35 (3) ◽

pp. 158-171 ◽

Cited By ~ 1

Author(s):

Rabia Rasheed ◽

Sulaman Hafeez Siddiqui

Keyword(s):

Decision Making ◽

Risk Factor ◽

Partial Least Square ◽

Least Square ◽

Equation Modeling ◽

Firm Characteristics ◽

Content Type ◽

Financial Decision Making ◽

Financial Decision ◽

The Relationship

Purpose The adoption and use of financial services by small- and medium-sized enterprises (SMEs) are pivotal in the development of inclusive financial markets. The purpose of this paper is to examine the influence of attitude on financial decision making of SMEs owner-manager. The attitude of SMEs owner-manager comprises of several factors; however, current study identifies few critical factors such as motivation, awareness and risk in the context of Pakistan. The study also includes the personal and firm characteristics as moderating variables to examine their effect on the relationship between attitude and financial decision making of owner-managers. Design/methodology/approach With the help of a structured questionnaire, total 285 valid responses are analyzed to accomplish the research objectives. The study uses SPSS and partial least square-structural equation modeling techniques in order to conduct analysis. The results of study highlight the importance of attitudinal factors such as awareness and risk. Moreover, the moderating effect of personal characteristics on the relationship between attitude and financial decision making has been found strong instead of firm characteristics. Findings The results show that the low awareness level of owner-managers regarding financial products and procedures significantly affects their attitude. Moreover, the less knowledge of financing terms as well as dominant role of owner-managers in taking firm decisions also increase the negative effect of risk factor on SMEs owner-manager attitude. Research limitations/implications The study suggested that policy makers should focus on the financial awareness of SMEs owner-manager to reduce the negativity of risk factor. Originality/value The study contributes toward the literature of inclusive finance and sustainability studies through better understanding of financial decision making of SMEs in emerging economies.

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Do Religious Reminders Help You With Your Financial Decisions?

International Journal of Applied Behavioral Economics ◽

10.4018/ijabe.2020070103 ◽

2020 ◽

Vol 9 (3) ◽

pp. 42-53

Author(s):

Orhan Erdem ◽

Amy Martin

Keyword(s):

Decision Making ◽

Undergraduate Students ◽

Time Preferences ◽

Prosocial Behaviors ◽

Financial Decisions ◽

Financial Decision Making ◽

Present Bias ◽

Laboratory Conditions ◽

Financial Decision ◽

The Relationship

Although religion is shown to be associated with several prosocial behaviors, not much work has been done on the relationship with economic or financial decision-making. This study aims to fill this gap. Surveying 87 undergraduate students under controlled laboratory conditions, the authors analyzed the effect of subtle reminders of religious concepts on time preferences in relation to finances. The results of the experiments showed that reminding participants of religious themes decreased the percentage of present bias by 10.4%.

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How Neurobiology Elucidates the Role of Emotions in Financial Decision-Making

Frontiers in Psychology ◽

10.3389/fpsyg.2021.697375 ◽

2021 ◽

Vol 12 ◽

Author(s):

Peter Bossaerts

Keyword(s):

Decision Making ◽

Financial Decision Making ◽

Financial Trading ◽

Human Choice ◽

Human Decision ◽

Financial Decision ◽

Behavior Based

Over the last 15 years, a revolution has been taking place in neuroscience, whereby models and methods of economics have led to deeper insights into the neurobiological foundations of human decision-making. These have revealed a number of widespread mis-conceptions, among others, about the role of emotions. Furthermore, the findings suggest that a purely behavior-based approach to studying decisions may miss crucial features of human choice long appreciated in biology, such as Pavlovian approach. The findings could help economists formalize elusive concepts such as intuition, as I show here for financial “trading intuition.”

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Economic Turmoil - Oil Prices and the Middle East Crisis

Global Economics Review ◽

10.31703/ger.2018(iii-i).08 ◽

2018 ◽

Vol III (I) ◽

pp. 71-80

Author(s):

Muhammad Zia-Ur Rehman ◽

Zahid Bashir ◽

Asia Baig

Keyword(s):

Decision Making ◽

Middle East ◽

Policy Making ◽

Investment Decisions ◽

Oil Prices ◽

Oil Production ◽

Financial Decision Making ◽

The World ◽

Financial Decision ◽

The Government

This study focuses on Economic turmoil due to issues of the Middle East and its relation to oil prices, hence transposing the crisis to other economies of the world. A qualitative and logical resigning technique is used during the study. The author finds that the Middle East has a lot of issues related to oil prices, oil production. Most important are wars and conflicts within the region, terrorism, radicalism, the influence of US in the region, week government, and issues of politics. This study provides information to the government in policy making, in investment decisions, in politics and in financial decision making related to oil prices and its production in the region

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Economic Decision Making, Emotion, and Prefrontal Cortex

Advances in Psychology, Mental Health, and Behavioral Studies - Neuroeconomics and the Decision-Making Process ◽

10.4018/978-1-4666-9989-2.ch007 ◽

2016 ◽

pp. 122-131 ◽

Cited By ~ 3

Author(s):

Salim Lahmiri

Keyword(s):

Decision Making ◽

Prefrontal Cortex ◽

Brain Regions ◽

Economic Decision ◽

Financial Decision Making ◽

Economic Decision Making ◽

Formal Framework ◽

Financial Decision ◽

The Relationship ◽

The Brain

How diverse regions of the brain are coordinated to produce objective-directed decision is the essence of neuroeconomics. Indeed, the latter is a formal framework to describe the involvement of numerous brain regions including frontal, cingulate, parietal cortex, and striatum in economic and financial decision-making process. The purpose of this chapter is to explain the relationship between economic decision making and emotion on one hand, and the relationship between economic decision making and prefrontal cortex on the other hand.

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Exploring the Relationship Between Stigma, Stigma Challenges, and Disclosure Among Slum-Dwelling Survivors of Intimate Partner Violence in Kenya

Violence Against Women ◽

10.1177/1077801219856101 ◽

2019 ◽

Vol 26 (10) ◽

pp. 1188-1208

Author(s):

Eleanor Maticka-Tyndale ◽

Jessica Penwell Barnett ◽

Trocaire

Keyword(s):

Decision Making ◽

Intimate Partner Violence ◽

Survey Data ◽

Support Groups ◽

Partner Violence ◽

Intimate Partner ◽

Urban Slums ◽

Financial Decision Making ◽

Financial Decision ◽

The Relationship

This article uses survey data from 131 women living in urban slums in Kenya to explore associations between stigma, stigma challenges, empowerment, and disclosure of intimate partner violence (IPV). A total of 81.7% of women reported informal or formal disclosure of IPV. A bystander offering help and experiencing stigma were associated with significant increases in the odds of informal and formal disclosure. There were also significant positive associations between participating in financial decision-making, membership in survivor support groups, and formal disclosure. Results suggest that interpersonal, community, and structural challenges to stigma interfere with stigma as a barrier to disclosure.

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Economic Decision Making, Emotion, and Prefrontal Cortex

Applications of Neuroscience ◽

10.4018/978-1-5225-5478-3.ch023 ◽

2018 ◽

pp. 466-476

Author(s):

Salim Lahmiri

Keyword(s):

Decision Making ◽

Prefrontal Cortex ◽

Brain Regions ◽

Economic Decision ◽

Financial Decision Making ◽

Economic Decision Making ◽

Formal Framework ◽

Financial Decision ◽

The Relationship ◽

The Brain

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Overconfidence and financial decision-making: a meta-analysis

Review of Behavioral Finance ◽

10.1108/rbf-01-2020-0020 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Matúš Grežo

Keyword(s):

Decision Making ◽

Meta Analysis ◽

Measuring Method ◽

Content Type ◽

Financial Decisions ◽

Financial Decision Making ◽

Indirect Measures ◽

Financial Decision ◽

The Relationship ◽

Direct Measures

PurposeThis meta-analysis reviews and summarizes the results of 34 studies to investigate the relationship between overconfidence and financial decision-making.Design/methodology/approachA correlation meta-analysis was conducted with three moderators of the relationship between overconfidence and financial decision-making examined: the type of overconfidence construct, the type of overconfidence measuring method and the type of financial decision-making.FindingsIt was found that the effect of overconfidence on financial decision-making was significant, but the magnitude of this effect was low. Additionally, indirect measures of overconfidence showed to have stronger effect than direct measures, and the overconfidence was mostly related to investment, followed by trading and innovativeness.Originality/valueThis was the first attempt to meta-analytically integrate results concerning the relationship between overconfidence and financial decision-making. Although overconfidence is described as a keystone for understanding financial decision-making, it was shown that it has rather limited effect on individuals' financial decisions. The findings suggest that indirect measures increase the overall effect and may cause the overvaluation of overconfidence in literature. The results call for more rigorous and consistent conceptualization of overconfidence in behavioral research.

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