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JOURNAL OF ORGANIZATIONAL PSYCHOLOGY
Behavioral Finance: Contributions of Cognitive Psychology and
Neuroscience to Decision Making
Author(s): James A. Howard
Citation: James A. Howard, (2012) "Behavioral Finance: Contributions of Cognitive Psychology and
Neuroscience to Decision Making," Journal of Organizational Psychology, Vol. 12, Iss. 2, pp. 52 - 70
Article Type: Research paper
Publisher: North American Business Press
Abstract:
This paper employs a five-paradigm model to assess various contributions of cognitive psychology and
neuroscience to understanding financial decision making. Whereas conventional academic finance
emphasizes financial theory, the emerging field of behavioral finance encompasses investigations of
cognitive and emotional factors affecting the financial decision making processes of individuals, groups,
and organizations. It looks at how people really make financial decisions, not at how theory predicts they
should make such decisions. Behavioral finance expands our understanding of financial decision making
in terms of personal financial decisions and how markets work but also comprises a new instrument in the
decision maker’s toolbox.
