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The Behavioural Finance Revolution

A New Approach to Financial Policies and Regulations Edited by Riccardo Viale, University of Milano-Bicocca, Italy and Herbert Simon Society, Shabnam Mousavi,Associate Scientist, Max Planck Institute for Human Development,Germany, Barbara Alemanni, University of Genoa and Umberto Filotto, University of Rome “Tor Vergata”, Italy
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.
Extent: 272 pp
Hardback Price: $140.00 Web: $126.00
Publication Date: 2018
ISBN: 978 1 78897 305 2
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  • Economics and Finance
  • Behavioural and Experimental Economics
  • Financial Economics and Regulation
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.

This book adopts a forward-looking agenda that takes account of existing practices based on behavioural science. It focuses on how to make financial markets an arena for fair play as a central criterion for securing and enhancing societal well being. It examines how bounded rationality, heuristic decision making, aversion to losses, endowment effects and social preferences may impact financial decisions, thus exposing the flaws in traditional forecasting methods that rely on an over-simplified
representation of the individual.

With contributions from both academics and practitioners, this book will be fundamental reading for researchers in the finance and behavioural economics. Regulators who wish to utilise behavioural policymaking will also find this a beneficial read.
‘10 years on from the global financial crisis, large gaps remain in our understanding of how to design effective financial policies and regulations, reflecting the fact that many policymakers have a limited understanding of what drives financial choices and decisions in the real world. In filling this gap, The Behavioural Finance Revolution collects together pathbreaking, insightful contributions from the perspective of real human behaviour. Key lessons from this impressively wide-ranging volume have the potential to transform financial regulation and policymaking for decades to come.’
– Michelle Baddeley, University of South Australia

‘The collective contributions in this important volume carve out a new path for how boundedly rational policymakers can structure sensible regulations for a world dominated by boundedly rational agents.’
– Hersh Shefrin, Santa Clara University, US

Contributors: B. Alemanni, C. Attia, M. Bianco, G. Bracchi, E. Cervellati, C. Cruciani, G. De Felice, M. Egidi, U. Filotto, F. Franceschi, G. Gardenal, G. Gigerenzer, C. Giorgiantonio, D. Hilton, N. Linciano, A. Lojschova, D. Masciandaro, B. Mojon, P. Mottura, S. Mousavi, A. Penalver, L. Portelli, U. Rigoni, S. Rossi, Z. Rotondi, G. Sillari, A. Varaldo, R. Viale, G. Zevi







Contents:

Salvatore Rossi
Foreword

Introduction
Barbara Alemanni, Umberto Filotto, Shabnam Mousavi, Riccardo Viale

Part I The Many Faces Of Finance In The Academia
1. Understanding Financial Behaviour For Better Policy Making: An Introduction
Riccardo Viale

2. Behavioral Policymaking With Bounded Rationality
Shabnam Mousavi

3. A Taxonomy Of Behavioural Policies
Barbara Alemanni

4. Do Regulators Know Better?
Umberto Filotto

5. Behavioral Finance And Non-Conventional Monetary Policies
Benoit Mojon, Adrian Penalver And Adriana Lojschova

6. The Psychology Of Financial Choices: From Classical And Behavioral Finance To Neurofinance
Massimo Egidi And Giacomo Sillari

7. Behavioral Re-Evolution: How Behavioral Economics Has Evolved And Is Evolving
Enrico Maria Cervellati

8. Evolutionary Regulation And Financial Behavior
Paolo Mottura

9. A View On Recent Advances In Behavioural Macroeconomics And Their Lessons For The Policymaker
Giordano Zevi

Part II Finance From The View Point Of Psychology, Banks, Regulators, And The Industry
10. The Heuristics Revolution: Rethinking The Role Of Uncertainty In Finance
Gerd Gigerenzer

11. The Psychology Of Financial Incompetence: Past, Present And Future
Denis Hilton And Caroline Attia

12. Behavioral Finance: From Financial Consumer Protection To Financial Education
Magda Bianco And Francesco Franceschi

13. Behavioral Impact Of Policies For The Start-Up And Venture Capital Ecosystem
Giampio Bracchi

14. Investors’ Inconsistencies And The Need For Better Financial Literacy
Gregorio De Felice

15. How Behavioral Finance Can Reshape Financial Consumer Protection: Consob’s First Steps In The European Framework
Nadia Linciano

16. When Central Bankers Become Humans: Behavioural Economics And Monetary Policy Decisions
Donato Masciandaro

17. Trust The Change? Trust And The Impact Of Policy Making: The Case Of The Introduction Of The Mifid 2 Directive In The Financial Advisory Industry
Ugo Rigoni, Caterina Cruciani And Gloria Gardenal

18. CMU And Role Of Institutional Investors: Investment Behavior And Governance Of Pension Funds
Zeno Rotondi And Cristina Giorgiantonio

19. The Italian Household Wealth And Their Financial Attitude: The New Environment And A New Approach
Alessandro Varaldo And Lorenzo Portelli

Index