As behavioral finance gains traction, new concepts are uncovered and introduced to the finance domain to enable people to properly understand how different humans behave in certain circumstances and why they do so. In their research, Klinger et al. (2014) have already indicated the increasing attention to this domain since, under different scenarios and in various situations, humans behave differently. Despite the field of finance being broad and despite it offering a huge scope of perspectives to research, Klinger et al. (2014) narrow down the areas of research to four main branches, namely, DNA analysis and financial behaviors, investor data and behavior, investor reaction, and experimental market assets. While some topics offer unique positions on the subject, DNA analysis and financial behaviors has reshaped how institutions and individuals view people with more research attempting to identify the existence of the above trend in the genes, the decision making, risk taking, co-holding, and financial knowledge. These topics will give an idea of the current topics researched in the field of financial behavior.
In one of the latest researches on the topic, the focus was given on understanding whether Dopamine Receptor D4 motivates people to engage in the investment activity. This research was complementary to a previous citation by Klinger et al. (2014) that attempted to link credit card borrowing and the monoamine oxidase A (MAOA) gene. The perspective of linking genes to various financial behavioral decision seems to be a trend, and as Muda et al. (2018) expound, other researchers have previously carried out the same idea with some linking the D$4 gene to risk taking. Although experts note that their research did not make any conclusive results to settle this debate, they note the potential to expand this study to other areas. This study contributes to the field of behavioral finance to continuously explore the discussion of how genes, which are segments of the DNA, shape behavior.
The element of decision making has also been introduced to be a part of financial decision making. In their research, Valaskova et al. (2019) studied this perspective to determine how it manifests in the process of making financial decisions. This element was raised in a previous study by Klinger et al. (2014) who argued that irrelevant changes in the decision environment can affect the behaviour of ï¬rms. Valaskova et al. (2019 extend their discussion to apply the fuzzy sets to both people and institutions. The research concludes that it is indeed possible to model human decision making. This research as well contributes to the argument that it is possible to ascertain human behavior under certain scenarios. This view emphasizes exploring this behavioral finance to uncover what more exists.
Risk taking perspective also falls under DNA analysis and financial behavior. In their article, Aydemir and Aren (2017) examine the possibility of individual factors manifesting on certain risky investments. Their research explores risk taking and an individual’s literacy level. In their result section, the authors settle on both locus of control and emotional intelligence positively impacting risk taking, while risk aversion has a negative impact. This study also introduces a new dimension on how risk is likely to manifest at an institutional level, explaining the type of skills that institutions should consider to hire.
The fourth article under this review explores the co-holding puzzle. The argument of Co-holding was previous introduced by Klinger et al. (2014) as a citation and alongside to self-control and financial literacy with the initial research finding its existence. However, in their research, Olafsson and Cathergood (2020) introduce data to find patterns studying co-holding at the daily frequency as opposed to the month frequency. They find patterns and further explore the rationalizations behind this topic. This research complements prior studies in noting the existence of the co-holding behavior.
The last article under this review highlights financial knowledge, confidence, credit use, and financial satisfaction, which are perspectives that were initially researched by prior researchers. In their research, Atlas et al. (2019) attempt to find the right mix of knowledge to facilitate better financial behavior and choices. Their research finds that confidence has a strong association to credit card usage, which leads to financial satisfaction. This research is complementary of previous research to determine whether there have been any differences on the topic.
This review investigates five articles to obtain an idea of the changes that may have taken place. The review identifies five random article highlighting different views of financial behavior. While not much difference has been witnessed save for the exception of studying genes, all the other papers introduce different dimensions of the topic that were studied previously. The topics shift their attention much more to the current scenarios.
References:
Altas, S. A., Lu, J., Micu, P. D., & Porto, N. (2019). Financial knowledge, confidence, credit use,
and financial satisfaction. Journal of Financial Counseling and Planning, 30(2), 175–190. https://files.eric.ed.gov/fulltext/EJ1241045.pdf
Aydemir, S. D., & Aren, S. (2017). Do the effects of individual factors on financial risk-taking
behavior diversify with financial literacy? Kybernetes, 46(10), 1706-1734 https://doi.org/https://doi.org/10.1108/K-10-2016-0281
Kliger, D., van den Assem, M. J., & Zwinkels, R. C. J. (2014). Empirical behavioral
finance. Journal of Economic Behavior and Organization, 107(Part B), 421–427. https://www.researchgate.net/profile/Martijn_Van_Den_Assem/publication/267628704_Empirical_Behavioral_Finance/links/5a43b288458515f6b052c0db/Empirical-Behavioral-Finance.pdf
Muda, R., Kicia, M., Michalak-Wojnowska, M., Ginszt, M., Filip, A., Gawda, P., & Majcher, P.
(2018). The dopamine receptor D4 gene (DRD4) and financial risk-taking: Stimulating and instrumental risk-taking propensity and motivation to engage in investment activity. Frontiers in Behavioral Neuroscience, 12. https://doi.org/https://doi.org/10.3389/fnbeh.2018.00034
Olafsson, A., & Gathergood, J. (2020). The Co-holding Puzzle: New Evidence from Transaction-
level Data. https://www.fdic.gov/bank/analytical/cfr/consumer/2020/gathergood.pdf
Valaskova, K., Bartosova, V., & Kubala, P. (2019). Behavioural aspects of the financial
decision-making. Organizacija, 52(1), 22–31. https://doi.org/https://doi.org/10.2478/orga-2019-0003