Neurofinance and investment behaviour

Abstract

Purpose

The purpose of this paper is to present a review as well as a synthesis of the extant literature in the field of Neurofinance. The paper has been divided into eight parts. The first and second parts introduce the paper and dwell upon the brain functions in financial decisions. Part three presents the origin of Neurofinance and part four explains the difference between traditional finance, behavioural finance and neurofinance. Part five and six of the paper look into the research studies in Neurofinance and their application. Part seven gives a brief discussion on the limitations of neurofinance studies and part eight gives the conclusion.

Design/methodology/approach

The existing body of academic literature pertinent to the domain of Neurofinance was reviewed so as to provide an integrated portrayal and synthesis of the current level of knowledge in this field. This paper covers the insights on the subject for developing a deeper understanding of the investor's psychology.

Findings

Neurofinance is a very young discipline. It tries to relate the brain processes to the investment behaviour. Most of the researches in the domain of neurofinance focus on trading behaviour. It would be interesting to explore the workings of the brain for other investment behaviours too like personal financial planning decisions, etc.

Originality/value

Neurofinance is emerging as an alternate field of study and practice and this paper is an attempt to look at the development of Neurofinance and its role in developing a better understanding of the investor behaviour.

Citation

Kalra Sahi, S. (2012), "Neurofinance and investment behaviour", Studies in Economics and Finance, Vol. 29 No. 4, pp. 246-267. https://doi.org/10.1108/10867371211266900