Finance & Investing Archives - BehavioralEconomics.com | The BE Hub

The Wealth of Wellbeing: A Behavioural Science Perspective

Krystle McGilvery — Sat, 18 May 2024 10:50:19 +0000

When we think about wellbeing, we often think about our health, including our mental state. Research has found that good financial health has a huge influence on improving overall wellbeing, while poor financial health is linked to stress, depression and lack of productivity. People in receipt of financial education often report feeling more confident, more in control of personal finances and exhibit better financial behaviours. Good finances have an added positive impact on the wider community and generations to come.

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The Other Side of Hope

Siria Xiyueyao Luo — Tue, 06 Dec 2022 15:49:31 +0000

Hope is a positive emotion. It helps people to get through hard times. But hope can have a flip side: it keeps people from walking away from bad situations when they should. When it's time to sell losing stocks, as explained in this article, the hope to break even might make investors end up in a worse financial situation.

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The Psychology of Debt Collection

Maria Douneva — Mon, 10 Oct 2022 07:54:27 +0000

More and more people struggle with debt, and while people differ in their motivations, preferences, and their reasons not to pay, debt collection practices rarely take these factors into account. Using psychological insights, debt collection can be made more debtor-friendly and effective. The results: increased repayments for companies and a lower financial burden for consumers.

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Empathizing With Future Selves

Matt Johnson — Mon, 19 Sep 2022 06:00:18 +0000

We’re generally poor at predicting how events will impact future states of happiness. And yet, if we’re going to make good decisions in the present, we need to empathize with our future selves at some level. How can we reconcile this? The answer may lie with art, visualization, and social cognition.

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The Behavioral Economics of Payment Methods

Merle van den Akker — Mon, 21 Mar 2022 09:13:02 +0000

There have never been more options to choose from when paying. Under conventional Economics assumptions, this should not make a difference in either decision-making or outcomes. According to behavioral economics, however, the payment method chosen does impact (financial) decision-making and its possible outcomes. In this article we dive into the impact a payment method can have on financial decision-making.

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A Nudge Against Panic Selling: Making Use of the IKEA Effect

Amin Zokaei Ashtiani — Wed, 21 Jul 2021 14:20:44 +0000

A typical behavioral pattern of investors is to reduce stock market exposure after a crash. We suggest a simple nudge based on the IKEA effect and the endowment effect that reduces this problem substantially: In case of a market crash, stockholders who have chosen their own portfolios are more likely to stick with their investment choices.

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A Safe Space: Privacy Concerns and Financial Support Tools

Think Forward Initiative — Tue, 25 May 2021 14:14:13 +0000

Consumers are becoming increasingly concerned about data privacy in their interactions with tools that support financial decision-making. The authors of this TFI research project investigate the impact of privacy concerns on consumers’ use of financial support tools by conducting four experiments using a savings calculator tool, a mortgage calculator tool and an investment advice tool.

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When Red Means “Go”: Color and Cultural Reactance in Risk Preferences

Feng Jiang — Tue, 06 Apr 2021 10:07:03 +0000

Color can affect judgment and decision making, and its effects may vary across cultures. Research reported in this article shows that cross-cultural color effects on risk preferences are influenced by personal associations of color-gain/loss. Our research finds a cultural reactance effect, a phenomenon in which people who hold culturally incongruent (vs. cultural mainstream) color associations show a stronger risk preference.

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The Budgeting App Trap: When Spending Information Backfires

Think Forward Initiative — Wed, 10 Mar 2021 10:50:20 +0000

Do budgeting apps always improve consumers' financial decisions? Contrary to common beliefs, the use of budget apps can increase spending, especially at the end of the budget period. The authors of this article propose five interventions to mitigate the acceleration of spending and help FinTech apps better serve consumers' financial needs.

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Budget Depreciation: When Budgeting Early Increases Spending

Think Forward Initiative — Tue, 01 Dec 2020 09:55:07 +0000

Budgeting in advance is a good practice to control spending. Research reported in this article, however, shows that budgeting too early for a specific purchase may increase spending. This is due to what the authors term 'budget depreciation', a process in which consumers adapt to the reference point set by the budget, lower their pain-of-payment from the budgeted amount, and increase their willingness-to-spend.

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