Annotated Bibliography
Ding, S., Lugovskyy, V., Puzzello, D., Tucker, S., & Williams, A. (2018). Cash versus extra-credit incentives in experimental asset markets. Journal of Economic Behavior & Organization, 150, 19-27.
In their research, Ding et al. (2018) seek to answer the question of whether experimental asset markets are an alternative to the traditional financial principles of organizing economic flows. In particular, the authors note that cash sessions can theoretically be replaced by extra credit as an adequate reward medium (Ding et al., 2018). Behavioral finance, in this case, is little touched upon and concerns the investment intentions of the subjects considered from the perspective of experimental financial payments. The lack of this data does not allow obtaining a comprehensive picture since the main emphasis is on the differences between cash and extra-credit sessions but not the features of stimulating intentions.
At the same time, the article is useful as a resource that shows that the insignificant difference in perception does not allow experimental asset markets to be called the dominant form. Among all the studies involved, the research by Ding et al. (2018) is the only one that brings up this topic. In this regard, the differences and similarities in the assessment of cash and extra-credit systems can be utilized usefully to evaluate the extent to which market participants tend to rely on alternative asset flows.
This resource will be used in future discussion as a justification for the fact that when choosing experimental economic instruments, motives depend on different criteria and not only on personal incentives. The article will help supplement the reasoning regarding behavioral finance and contribute to evaluating alternative asset markets. The juxtaposition of cash and extra-credit sessions will be cited as an important rationale in the context of the motivations for a particular choice.
Huang, J. Y., Shieh, J. C., & Kao, Y. C. (2016). Starting points for a new researcher in behavioral finance. International Journal of Managerial Finance, 12(1), 92-103.
Huang et al. (2016) aim to assess the phenomenon of investor behavior and influencing factors in academic literature and pay particular attention to irrational decisions and their causes. Behavioral finance is examined from the perspective of the impact of non-standard situations on specific motives, and the article reviews the findings from various resources on this topic. The key conclusion that the authors make is asserting the prevalence of empirical research in the field under consideration over other forms of evaluating behavioral incentives from different financial perspectives (Huang et al., 2016). The article, however, focuses more on the assessment of existing findings rather than individual research, which allows summarizing the results but not making unique statements.
In terms of evaluating findings, of all the articles on behavioral finance involved, this study provides the broadest analysis. In addition, the article offers research data from many years, thus covering a large period. Nevertheless, in addition to a systematic review, the study does not contain controversial or unique arguments, which allows using it as an auxiliary resource but not as a background for making new hypotheses, unlike some other articles.
The findings from the study by Huang et al. (2016) can be used in future discussions as a justification for the relevance of the topic of behavioral finance in different years. The arguments about the prevalence of empirical research will make it possible to make a verdict on the role of personal assessments in the perception of relevant motives. The role of non-standard environments will also be cited as an important decision-making criterion.
Klein, P. O., Turk, R., & Weill, L. (2017). Religiosity vs. well-being effects on investor behavior. Journal of Economic Behavior & Organization, 138, 50-62.
The main research question of this article aims to address the relationship between religiosity and investor behavior, thereby identifying the corresponding correlations and the influence of personal beliefs on the response to fluctuations in the stock market. Klein et al. (2017) conclude that religion largely shapes financial behavior and should be considered as a criterion that determines relevant trends in financial markets. The article examines only the religious aspect and does not address other factors related to behavioral finance. Through complex digital assessments of the stock market models, connections are built between investor behavior and the management of financial flows, which can be utilized as a justification for the impact of external factors on investor decisions.
The article by Klein et al. (2017) is the only one among the others involved that considers the factor of religiosity in the context of behavioral finance. As with several other studies, this research utilizes complex formulas to identify relevant correlations and provide accurate data. This information allows talking about the validity of the findings and confirms the practical value of the calculations with regard to investor behavior manifestations.
The outcomes of this study will be used in future discussion, and external criteria, particularly religiosity, will be mentioned as drivers that determine investor behavior. Assessing the connections between the environment and specific motives is critical to mention in the context of the topic of behavioral finance. The arguments about cultural incentives will be included in the discussion to highlight the relevance of their role in investor decision-making.
Krokida, S. I., Makrychoriti, P., & Spyrou, S. (2020). Monetary policy and herd behavior: International evidence. Journal of Economic Behavior & Organization, 170, 386-417.
The main objective of Krokida et al. (2020) is to measure how existing monetary policies and changes in the financial sector affect investor reactions and behaviors. The authors draw a parallel between traditional and unconventional policies and mention herd behavior as one of the criteria to take into account when analyzing behavioral finance (Krokida et al., 2020). Market indicators of different countries are analyzed with an emphasis on the European market. The findings confirm the relationship between changes in the financial sector and investor response and compared to European countries, changes in monetary policies affect market herding more strongly in the US.
Along with several other studies involved, this article considers investor behavior one of the significant factors, which brings practical significance to the analysis of this topic. Numerous graphs and tables increase the validity of the findings and make the overall study more readable. Krokida et al. (2020) do not address specific incentives, such as religiosity, and their work covers the realm of finance in general, with an emphasis on fluctuations and their effects. The lack of cultural characteristics is a limitation, and a more detailed discussion of these factors could enhance the value of the research.
The arguments about the role of changes in monetary policies and their relationship to investor reactions will be mentioned in future discussions as essential aspects of behavioral finance. This is important to mention these correlations in view of the clearly traced connections and psychological criterion of influence. The findings of herd behavior will be included in the discussion as evidence supporting the collective nature of fluctuation perceptions in the financial sector.
Xu, Y., Briley, D. A., Brown, J. R., & Roberts, B. W. (2017). Genetic and environmental influences on household financial distress. Journal of Economic Behavior & Organization, 142, 404-424.
Xu et al. (2017) study the role of genetic factors and their unique manifestations in relation to the topic of behavioral finance and seek to answer the question of the role of individual properties. The key findings support positive correlations between financial distress and personality traits, particularly cognition, at the genetic level. The researchers also argue for environmental criteria, such as family relationships, and note the influence of these factors on relevant behaviors (Xu et al., 2017). Cognitive abilities and socioeconomic status are seen as critical aspects and predictors of financial distress. Collective manifestations are not considered in the article, which does not allow drawing conclusions about general trends, but the data on personal predispositions are no less important.
This study is the only one among those involved in which the DNA information is discussed. In addition, unique genetic aspects are identified, which distinguishes the article from the others and allows it to be used as a guideline for assessing personal predispositions for specific behaviors. The formulas and calculations make it possible to prove the existence of the considered correlations and explain the relationship between the variables under consideration, thereby increasing the credibility of the research.
The key value of this article for the future discussion is an opportunity to use the arguments about genetic and environmental stimuli that influence behavior in the financial sector. The research will be useful use due to the proven correlations between individual characteristics, including cognition and socioeconomic status. The information about personal criteria will be mentioned in the context of behavioral finance with an emphasis on the value of DNA analysis.
Discussion
The factors influencing the behavior of different financial market participants are based not only on external drivers, for instance, fluctuations in stocks or sales figures, but also on internal motives that determine individual preferences and decisions. In this regard, the concept of behavioral finance has developed as a theory that reflects the personal incentives of investors or sellers associated with psychological aspects of perception. Reactions to specific events or economic shifts largely convey the individual sentiments of the participants involved but, at the same time, can be viewed from the perspective of a collective attitude towards certain changes.
In conditions of high dynamics of financial trends and fluctuating economic balance, the analysis of these aspects are of great importance. This discussion explores the distinctive manifestations of this perception and uses the factors of investor reaction, genetically determined behavioral incentives, experimental asset markets as drivers for behavior change, and the general theory of behavioral finance.
By synthesizing the information and findings obtained from the analysis of relevant academic sources, one can conclude that personal motives play an essential role in the perception of the characteristics of the financial market and largely determine corresponding behaviors. The studies by Huang et al. (2016) and Kliger et al. (2014) emphasize the significance of different environments and their influence on behavioral aspects and confirm the value of conducting empirical research to identify specific trends.
The findings on the distinctive perceptions of cash and extra credit and concerning drivers of financial decision-making in conditions of alternative asset markets, discussed by Ding et al. (2018), also deserve particular attention. The results of the study by Krokida et al. (2020) complement the theoretical framework on the impact of shifts in monetary policies on investor reactions. Any market fluctuations are regarded as incentives that affect behavioral aspects, and this is crucial to take these influences into account to make relatively accurate forecasts concerning the development of the financial market. Moreover, along with economic incentives, including the aforementioned monetary policies, some sociocultural criteria are also associated with the concept of behavioral finance.
As Klein et al. (2017) state, religiosity, being one of such aspects, determines investor decision-making and is the incentive that depends on the individual views of the participants in financial processes. These findings are consistent with those of Huang et al. (2016) on the role of personal value judgments and confirm the ideas of Kliger et al. (2014) on independent behavioral patterns based on intrinsic motives. The research by Xu et al. (2017) on the role of genetic factors revealed through the DNA analysis and psychological aspects of personality that influence investor perception can be considered along with the findings of Klein et al. (2017) on the role of the environment, for instance, the family, in shaping corresponding financial decisions.
Thus, the topic of behavioral finance, when viewed from the perspective of external and internal incentives, addresses a wide range of motives that determine the perception of certain trends, and from an empirical perspective analyzed by Kliger et al. (2014), individual attitudes play a significant role. Therefore, the assessment of personal judgments always accompanies this research field.
To expand the knowledge of the industry and obtain new data on behavioral finance, subsequent research may address narrower aspects of the topic. For instance, in addition to the findings of Huang et al. (2016) on non-standard environments that affect the behavior of financial market participants, specific situations can be considered, for example, the crisis conditions of the economy and their impact on investor reaction. The study by Xu et al. (2017) can be valuable background for a more detailed analysis of genetic aspects but not just cognition and socioeconomic indicators.
While taking into account external stimuli, the ideas of Klein et al. (2017) and Krokida et al. (2020) may become the basis for a deeper assessment of personal motivators concerning not only religiosity but also other factors, for instance, geographic location, cultural incentives, and other criteria. The evaluation of the topic raised by Ding et al. (2018) could be augmented since, in addition to alternative asset markets, other forms of non-standard financial management principles may be reviewed. As a result, the range of topics covered allows for delving deeper into the study of behavioral finance.
Reference
Kliger, D., van den Assem, M. J., & Zwinkels, R. C. (2014). Empirical behavioral finance.Journal of Economic Behavior & Organization, 107(Part B), 421-427.