Behavioral Finance

Over the last 50 years, neoclassical financial theory has been dominating our perception of what is happening in financial markets. It has spurred numerous valuable theories and concepts all based on the concept of Homo Economicus, the strictly rational economic man. However, humans do not always act in a strictly rational manner. For students and practitioners alike, our book aims at opening the door to another perspective on financial markets: a behavioral perspective based on a Homo Oeconomicus Humanus. This agent acts with limited rationality when making decisions. He/she uses heuristics and shortcuts and is prone to the influence of emotions. This sounds familiar in real life and can be transferred to what happens in financial markets, too.

Over the last 50 years, neoclassical financial theory has been dominating our perception of what is happening in financial markets. It has spurred numerous valuable theories and concepts all based on the concept of Homo Economicus, the strictly rational economic man. However, humans do not always act in a strictly rational manner.For students and practitioners alike, our book aims at opening the door to another perspective on financial markets: a behavioral perspective based on a Homo Oeconomicus Humanus. This agent acts with limited rationality when making decisions. He/she uses heuristics and shortcuts and is prone to the influence of emotions. This sounds familiar in real life and can be transferred to what happens in financial markets, too.

Section 1: The Homo Economicus in the center of Traditional Finance1. How Traditional Finance shaped the Rational Economic Man2. Limitations of the traditional finance theorySection II: Recurring speculative bubbles - triggered by the Homo Oeconomicus Humanus3. Investor behavior from the perspective of Behavioral Finance4. Speculative bubbles as a sign of market anomalies5. Historical speculative asset price bubblesSection III: Homo Oeconomicus Humanus in information and decision making processes6. Phases of decisions making7. Limited rationality in the perception of information8. Limited rationality in the processing of information9. Limited rationality in investment decisionsSection IV: Applications of Behavioral Finance and recent developments10. Applications of Behavioral Finance in Wealth Management11. Application of Behavioral Finance in corporate management12. Financial Nudging - behavioral approaches for better financial decisions13. Further development of Behavioral Finance - a look into the future