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Giampio Bracchi

This chapter discusses the existing public policies for start-ups and Venture Capital and the empirical evidence of their effects on the opportunistic behavior of the actors of the technological and financial ecosystem, with a focus on the Italian environment. Problems of governance of academic organizations are analyzed first, in order to understand the factors that affect entrepreneurial behaviors of researchers and the motivational systems that spur individuals and departments to act in an entrepreneurial way. The effects of fiscal incentives on the performance of the start-up ecosystem are finally examined.

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The Behavioural Finance Revolution

A New Approach to Financial Policies and Regulations

Edited by Riccardo Viale, Shabnam Mousavi, Barbara Alemanni and Umberto Filotto

Financial markets are complex. Regulators strive to predict ways in which they can malfunction and create rules to prevent this from happening, yet behavioural impacts are often overlooked. This book explores how behavioural finance can go hand-in-hand with traditional methods to help banks and regulators create better policies. It also demonstrates how the behavioural finance revolution has opened the way to a more integrated approach to the analysis of economic phenomena.
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Umberto Filotto

Behavioral regulation is on the agenda of politicians and authorities of most countries as coercive legislation has financial and political costs that are becoming difficult to afford. However, not all measures are equivalent, and not all of them are effective and appropriate in any situation: some issues have thus to be discussed to develop an effective and balanced approach. The preliminary step is the development of a shared vision of objectives of the regulation; once this is reached there are some issues specific to the behavioral approach. The first one is answering the question of the preferability of the gentle push over mandatory rules; then, if we accept the fact that regulators have the right and the duty to regulate, we should be confident that they are competent enough; finally there is the issue of responsibility: what happens, who is responsible and what are the consequences if things go wrong?

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Salvatore Rossi

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Gregorio De Felice

The 2017 edition of the ‘Survey on Italian Saving and Financial Choices’, carried out yearly by Centro Einaudi and Intesa Sanpaolo, reveals some inconsistencies in the attitude of Italian savers towards investment. First, while showing quite a low propensity to bear risk, very few people diversify their investments. Second, even if understanding the degree of risk inherent in different investment proposals is perceived as the single most difficult task that savers must afford, people do not devote time and effort to gain financial information. Although initiatives are already underway in Italy in the field of financial education, greater effort is probably needed. The good news is that respondents aged between 18 and 24 show comparatively higher financial competence: this could represent a promising indication for the future.

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Edited by Riccardo Viale, Shabnam Mousavi, Barbara Alemanni and Umberto Filotto

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Massimo Egidi and Giacomo Sillari

In this chapter we address theoretical developments of choice models in the financial field, starting with the famous efficient market hypothesis (EMH) in financial markets and its implications, then moving on to a review of the theoretical and empirical challenges posed by psychological and behavioral studies to the EMH, paying particular attention, once again, to these arguments’ implications on the activity of financial operators. Finally, we look at the most recent studies aimed at identifying the neurophysiological links of financial choices.

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Caroline Attia and Denis Hilton

The chapter reviews several kinds of judgmental bias that have been documented by psychologists and show how each of these seems to have contributed to recent financial crises, notably the subprime mortgage crisis of 2007, but also other examples such as the collapse of Long-Term Capital Management in 1998 and the management of the Greek debt crisis from 2008. The biases reviewed are well-known to students of human judgment and decision-making and include judgmental overconfidence (including undersampling), positive illusions, temporal discounting, the affect heuristic and groupthink. We then ask how these cognitive biases can be corrected for in the future, and suggest that greater use of causal models may give finance and macroeconomics greater predictive power. We take our psycho-historical review as showing that the persistent evidence of irrationality in consumers, financial analysts and government experts means that markets cannot be left to regulate themselves, and that other means (education, training, choice design, regulation of compensation packages and so on) need to be explored.

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Riccardo Viale

The chapter introduces some relevant neurocognitive topics on financial behaviour: the biases in financial predictions; the role of emotions in changing the weight of probability in financial risk assessment; the pragmatic aspect of communication in the financial market; the new neural discoveries about the phenomena of economic mirroring, imitation and free will; the emerging topic of organizational financial heuristics. Most of these data represent important knowledge to improve financial policy making and in particular to strengthen the new approach of behavioural policy making and regulation.

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John A. List and Anya Samek