A Fast and Frugal Finance: Bridging Contemporary Behavioral Finance and Ecological Rationality

by William P. Forbes, Aloysius Obinna Igboekwu, Shabnam Mousavi

Overview

A Fast and Frugal Finance: Bridging Contemporary Behavioural Finance and Ecological Rationality adds psychological reality to classical financial reasoning. It shows how financial professionals can reach better and quicker decisions using the ‘fast and frugal’ framework for decision-making, adding dramatically to time and outcome efficiency, while also retaining accuracy. The book provides the reader with an adaptive toolbox of heuristic tools and classification systems to aid real-world decisions. Throughout, financial applications are presented alongside real-world examples to help readers solve established problems in finance, including stock buying and selling decisions, when faced with not only risk but fundamental uncertainty.

The book concludes by describing potential solutions to financial problems in the forefront of contemporary debates, and calls for taking psychological insights seriously.

• Demonstrates how well-constructed ‘fast and frugal’ models can outperform standard models in time and outcome efficiency
• Focuses on how financial decisions are made in reality, using heuristics, rather than how such decisions should be made
• Discusses how cognition and the decision-making context interact in producing ‘fast and frugal’ choices that follow ecological rationality
• Explores the development of decision-making trees in finance to aid in decision-making

Product Details

ISBN-13:	9780128124963
Publisher:	Elsevier Science
Publication date:	11/15/2019
Series:	Perspectives in Behavioral Economics and the Economics of Behavior
Sold by:	Barnes & Noble
Format:	eBook
Pages:	276
File size:	8 MB

About the Author

William Forbes is a Teaching Associate at Queen Mary University of London. Forbes has researched and taught upon behavioural finance for nearly twenty years. Previously, he has worked in Exeter, Manchester, Glasgow and Loughborough Universities. He is the author of Behavioural Finance (John Wiley&Son, 2009), and co-author of Corporate Governance in the United Kingdom: Past, Present and Future (Springer, 2014).
Aloysius Igboekwu is a Lecturer in Finance and the Director of Postgraduate Studies at Aberystwyth Business School, Aberystwyth University, United Kingdom. His research in asset pricing, behavioral finance, corporate finance and governance, and market-based accounting has appeared in international journals. He is a reviewer for the Journal of Risk Finance, and serves as a guest editor for the Qualitative Research in Financial Markets.
Shabnam Mousavi is a fellow at the Max Planck Institute for Human Development in Berlin. She is president of the Society for the Advancement of Behavioral Economics, editor-in-chief for Mind and Society, also, co-editor of the Handbook of Behavioral Economics (Routledge, 2017) and of The Behavioral Finance Revolution: A New Approach to Financial Policies and Regulations (Edward Elgar, 2018).

Table of Contents

Section I A Fast-and-Frugal Approach to Finance 1. Introduction2. Fast-and-Frugal Heuristics3. Adaptive or Efficient Financial Markets?4. Financial Regulations and Heuristics5. When Fast-and-Frugal Works Best

Section II Applications of Fast-and-Frugal Finance6. Fast-and-Frugal Asset Pricing7. Fast-and-Frugal Portfolio Theory8. Fast-and-Frugal Financial Analysis9. Inference Under the Law of Small Numbers: Earnings Streaks Rather Than Earning Numbers10. A Fast-and-Frugal Finance

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From the Publisher

An introduction to financial reasoning from the 'fast and frugal' perspective of behavioral finance that includes techniques for practitioners