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Understanding human beings to understand finance

When analyzing financial markets, investor choices, or analyst predictions, we are essentially discussing the behavior of economic agents. Both economy and finance depend on the interaction between subjects, making the adjective “behavioral” seemingly redundant—but Barbara Alemanni puts it in her book's title, and for good reason.

 

Keynes focused on individual preferences, but in the 1940s, economics began to rely on theoretical models that assumed agent rationality. This abstraction led to losing sight of the individual who acts and decides. In the 1970s, facing a growing gap between theory and reality, psychologists like Daniel Kahneman and Amos Tversky redirected attention to human behavior, introducing cognitive psychology into economics. Their research delineated the boundaries of human irrationality.

 

Over the past fifty years, behavioral economics has further enriched itself through neuroscience, accelerating the understanding of decision-making mechanisms. Today, those studying behavioral finance not only map out the errors of economic agents but also seek to correct them (debiasing) or use individuals' approximate reasoning for better decisions (boosting). Another approach, nudging, leverages errors to promote virtuous behaviors.

 

Barbara Alemanni, Affiliate Professor of Banking and Insurance at SDA Bocconi School of Management and Full Professor of Banking at the University of Genoa, in her book Finanza comportamentale. Scoprire gli errori che ci fanno perdere denaro, addresses multiple audiences: financial advisors, investors, and issuers of investment instruments.

 

The book is structured in eight chapters, covering topics like financial literacy and cognitive and emotional errors, macroeconomic dynamics, and the roles of regulators and financial advisors.

 

The final chapter explores the integration of Fintech with the behavioral approach. The book is complemented by a digital apparatus, which offers readers additional materials, examples, tests, and links to resources (especially videos) available online.

 

  • Publisher: EGEA.
  • Date of Publication: May 2024.
  • ISBN: 978-88-238-3956-4.
  • Pages: 292.
  • Format: paper, digital.

 

 

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