Table of Contents

Handbook of Behavioral Finance

Handbook of Behavioral Finance

Elgar original reference

Edited by Brian Bruce

The Handbook of Behavioral Finance is a comprehensive, topical and concise source of cutting-edge research on recent developments in behavioral finance.


Bruce Brian

Subjects: economics and finance, behavioural and experimental economics, economic psychology, financial economics and regulation


Brian Bruce The following paragraphs outline the structure of the handbook. In Chapter 1, the results of an asset market experiment, in which 64 subjects trade two assets on eight markets in a computerized continuous double auction, indicate that objectively irrelevant information influences trading behavior. It was found that positively and negatively framed information leads to a particular trading pattern, but leaves trading prices and volume unaffected. The experiment also provided support for the disposition effect. Participants who experience a gain sell their assets more rapidly than participants who experience a loss, and positively framed subjects generally sell their assets later than negatively framed subjects. Chapter 2 examines whether information overload might partially explain why defined contribution plan participants tend to limit their information search and use simple heuristics. The results of the experiments performed suggest that the success of certain plan features depends strongly on the financial background of the participant. We find that low-knowledge individuals opt for the default allocation more often than high-knowledge individuals. The results emphasize the importance of plan design, especially the selection of plan defaults, and the need to improve the financial literacy of participants. The third chapter examines investment decisions using the fundamental investment decision matrix to define investment success and investment error. The framework is effective in describing passive investment. Conditional risk attribution (CRA) is a tool for identifying the asymmetric returns available to passive investors. The geometric interpretation is expanded into generalized conditional risk attribution (GCRA) to measure the effectiveness of...