Behavioral economics and finance: a selective review of models, methods and tools

Orlando Gomes

Studies in Economics and Finance, 2022, vol. 40, issue 3, 393-410

Abstract: Purpose - This paper aims to survey literature on behavioral economics and finance, with particular emphasis on a selection of models, methods and tools that this strand of thought uses to approach and explain observable phenomena. Design/methodology/approach - After a brief discussion on the meaning and context of behavioral economics, the manuscript identifies five topics of special interest: time preference, heuristics, emotions, finance and macro behavior. For each of these topics, relevant models, methods and tools are identified and scrutinized. Findings - Behavioral economics and finance establish an effective bridge between orthodox economic thinking and new and revolutionary methods of analysis. Exploring the intricacies of human behavior can frequently be done by adapting the trivial and conventional intertemporal utility maximization models that economists insistently resort to, but to fully grasp such intricacies, a step forward is required. Agent-based models and other tools from complexity sciences constitute the analytical arsenal that is needed to improve our understanding of how behavioral issues attach to heterogeneity, local interaction, path-dependence, out-of-equilibrium dynamics and emergence. Originality/value - Although surveys on behavioral economics and finance abound in the specialized literature, this study has the peculiarity of emphasizing five relevant topics that are particularly illustrative of the pivotal role of behavioral science in promoting the transition from the strict neoclassical perspective to a less mechanic and more organic view of economics and finance.

Keywords: Behavioral economics; Behavioral finance; Time preference; Heuristics; Emotions; Agent-based modeling (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:sefpps:sef-06-2022-0304

DOI: 10.1108/SEF-06-2022-0304

Access Statistics for this article

Studies in Economics and Finance is currently edited by Prof Niklas Wagner

More articles in Studies in Economics and Finance from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().