Policy Implications and Future Directions

Kok Loang Ooi
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Kok Loang Ooi: University of Malaya

Chapter Chapter 11 in Demystifying Behavioral Finance, 2024, pp 139-147 from Springer

Abstract: Abstract Chapter 11 examines the legislative and regulatory ramifications of behavioural finance, suggesting implementable frameworks to mitigate the psychological susceptibilities that affect financial decision-making and market dynamics. The chapter examines the need for improved disclosure mandates, including streamlined risk communication on retail investing platforms, to alleviate the effects of cognitive biases such as anchoring and overconfidence. It also supports the regulation of social media’s impact on trading behaviour to mitigate the dangers associated with herd mentality and market anomalies generated by disinformation. The chapter assesses the ethical implications of developing financial technology, including AI-driven investor protection mechanisms and the regulation of high-frequency and algorithmic trading. It underscores the need of worldwide harmonisation of financial rules to mitigate systemic risks exacerbated by behavioural biases in linked markets. The chapter highlights the efficacy of behavioural nudges in retirement planning and sustainable investment to synchronise individual decisions with long-term financial health. Chapter 11 offers a framework for enhancing the resilience and inclusivity of financial systems via the incorporation of behavioural insights into policy formulation. It continues by delineating prospective avenues for behavioural finance research, underscoring its pivotal function in fostering financial innovation and safeguarding investor interests within an increasingly intricate and digitised financial environment.

Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-96-2690-8_11

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DOI: 10.1007/978-981-96-2690-8_11

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