Arbeitspapier
Emotions, Bayesian inference, and financial decision making
This paper presents a model in which rational and emotional investors are compelled to make decisions under uncertainty in order to ensure their survival. Using a neurofinancial setting, we show that, when different investor types fight for market capital, emotional traders tend not only to influence prices but also to have a much more developed adaptive mechanism than their rational peers, in spite of their apparently simplistic demand strategy and distorted revision of beliefs. Our results imply that prices in financial markets could be seen more accurately as a thermometer of the market mood and emotions rather than as simple informative signals as stated in traditional financial theory.
- Language
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Englisch
- Bibliographic citation
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Series: Darmstadt Discussion Papers in Economics ; No. 166
- Classification
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Wirtschaft
- Subject
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Judgement under uncertainty
Bayesian Inference
Behavioral Finance
Decision Making
Emotions
- Event
-
Geistige Schöpfung
- (who)
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Salzman, Diego
Trifan, Emanuela
- Event
-
Veröffentlichung
- (who)
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Technische Universität Darmstadt, Department of Law and Economics
- (where)
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Darmstadt
- (when)
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2005
- Handle
- Last update
-
10.03.2025, 11:41 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Salzman, Diego
- Trifan, Emanuela
- Technische Universität Darmstadt, Department of Law and Economics
Time of origin
- 2005
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