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Paris Champerret
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Turin
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"Behavioral finance is the branch of financial studies that focuses its research on the psyche's role in financial decision-making. Simplifying, emotions and psychology play a crucial role in all the decisions involved in our actions, determined by who we are and how we are used to behave by our surroundings. Behavioral finance first originated from the work of psychologists Daniel Kahneman and Amos Tversky as well as from the works of the economist Robert Shiller in 70’s and 80’s. Theories developed by the latter ones follow a rigid application of pervasive, deep-seeded, subconscious biases and heuristics to the way people make financial decisions and, in parallel, they started to build the efficient market hypothesis (EMH), a popular theory that the stock market follows rational and predictable movements, fluctuations don’t always hold up under scrutiny. To better address this phenomenon, the attention of policy makers and supervisory authorities to anomalies such as in the production process of financial products, in information asymmetries or in opacity on the distribution side is now well established; newborn, and still very circumscribed, however, is the reflection on the subjective difficulties that qualify, and can differentiate, individuals’ choices in the face of the same objective risk. Behavioral finance offers important insights in this regard, pointing out how individuals' decision-making processes are a mixture of rationality and emotionality.
The final aim of the dissertation is to provide the most comprehensive view possible of the subjectivity role within every decision-making pattern pursued by individuals, professionals, and investors, bearing in mind the dualism originated from the coexistence of rationality, tradition, and logic together with the psychology, irrationality, emotions, and behavioral traits."
