What can we learn from neurofinance ?

François Desmoulins-Lebeault, Jean-François Gajewski () and Luc Meunier ()
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François Desmoulins-Lebeault: EESC-GEM Grenoble Ecole de Management
Jean-François Gajewski: Université de Lyon, MAGELLAN - Laboratoire de Recherche Magellan - UJML - Université Jean Moulin - Lyon 3 - Université de Lyon - Institut d'Administration des Entreprises (IAE) - Lyon
Luc Meunier: EESC-GEM Grenoble Ecole de Management

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Abstract: Neurofinance is a relatively recent field which aims to unveil the neurobiological mechanisms through which decisions are made in finance. This article investigates how neurosciences can contribute to the study of finance and the most appropriate ways for neuroscientific methodologies to be applied to financial situations. In order to examine these areas, we have produced a literature review around three axes of the main neuroscientific studies published in finance: financial risk; discounting and credit risk; information and trading decisions. One of the crucial insights offered by neurofinance is how to reconcile classic and behavioral finance by showing that emotions are critical to rational decision-making, in spite of also being part of the origin of biases. Through its unique set of techniques, neurofinance is able to pinpoint the biological and neurological explanations behind some of the common biases highlighted by behavioral finance, as well as tackle some novel questions. We conclude this review by pointing toward potentially fruitful avenues for future research and by highlighting which methods appear particularly well adapted for neurofinancial studies.

Keywords: Neurofinance; risk aversion; information; emotion; time-discounting; brain; hormones; genes (search for similar items in EconPapers)
Date: 2018
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Published in Finance, 2018, 39 (2), pp.93-148. ⟨10.3917/fina.392.0093⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01901287

DOI: 10.3917/fina.392.0093

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