Psychological Perspectives on Financial Decision Making

Foreword
Preface
Contents
Contributors
About the Editors
Part I: The Level of the Brain
	Chapter 1: Neural Bases of Financial Decision Making: From Spikes to Large-Scale Brain Connectivity
		Spiking Neurons
			The Anatomy of the Neuron
			The Neuron at Rest: The Membrane Potential
			The Neuron in Action: The Action Potential
			Communication from One Neuron to the Next
			From Neurons to Networks
		Methodological Tools Used in Neuroscience
			Single-Unit Recording
			Functional Magnetic Resonance Imaging (fMRI)
			Electroencephalography (EEG) and Magnetoencephalography (MEG)
			Measuring the Communication Between Brain Regions
			Manipulating Brain Activity
		The Reward Circuit
			A Network of Cortical and Subcortical Structures
			Dopamine Neurons Encode a Reward Prediction Error (and More)
		Decision Making as Evidence Accumulation
			The Principle of Evidence Accumulation
			Evidence Accumulation in Single Neurons and Population of Neurons
			Evidence Accumulation in Large-Scale Brain Activation and Connectivity
		Concluding Remarks
		References
	Chapter 2: Neural Correlates of Decision Variables and Strategic Preferences
		Introduction
		Decision Neuroscience: An Overview
		Neuroscience and Financial Decision Making
			Valuation
			Risk and Uncertainty
			Neuroscience and Strategic Decision Making
		Future Directions
		References
	Chapter 3: Hormones, Stress and Financial Decision Making
		The Significance of Making Decisions and the Variety of Finance
		Cognition Versus Emotion
			The Role of Reward in Financial Decisions
			The Brain and Financial Rewards
			Risk Appetite and Financial Decisions
		Hormones and Financial Decisions
			Stress and Its Influence on Financial Decisions
			The Endocrine Stress Response
			Cortisol and Decision Making
			Stress and the Brain
		The Nature and Function of Testosterone
			Lifetime Trajectory of Testosterone
			Testosterone, Risk and Rewards
			The Menstrual Cycle and Decisions in Females
		The Importance of Trust: Oxytocin
		Interactions Between Hormones: The Importance of Endocrine Patterns
			The Covert Action of Hormones in Financial Decision Making
		References
Part II: The Level of an Individual Decision Maker
	Chapter 4: Cognitive Abilities and Financial Decision Making
		Introduction
		Intelligence
		Statistical Numeracy
		Multiple Numeric Competencies
			Approximate Numeracy
			Subjective Numeracy (Numeric Confidence)
		How to Improve Financial Decision Making?
			Cognitive Training and Education
				Cognitive Training
				Education
			Decision Aids
		Summary
		References
	Chapter 5: The Arrested Deployment Model of Financial Literacy
		Introduction
		Financial Literacy
		From Literacy to Rationality
		The Arrested Deployment Model
		Implications of the Model
		The Arrested Deployment Model in Action
			Emotional Influences
				Financial Avoidance
				Self-Control
			Tasks’ Features: Complexity and Timing Gratification of Financial Engagements
			The Long-Term Influence of a Financial Intervention Program: A Case Study
		Conclusions
			Implications
		References
	Chapter 6: Emotions and Financial Decision Making
		Introduction
		Emotions in Financial Decision Making: How Theoretical Views Have Changed over the Last 20 Years
		Integral Emotions
			The Functions of Integral Emotions in Decision Making
			Anticipated Emotions
			Mental Imagery as an Affective Input to the Decision Making Process
		Incidental Emotions
			The Functions of Incidental Emotions in Decision Making
			Mood as a Special Case of Incidental Emotions
			The Effects of Mood on Stock Market Behaviors
		Concluding Remarks
		References
	Chapter 7: Financial Decision Making and Individual Dispositions
		Introduction
		Saving
			Saving and Personality
			Saving and Time Perspectives
			Saving and Self-Control
			Saving and Motivational Systems
		Investing
			Investing and Personality: The Big Five Model
			Investing and the Dark Triad of Personality
			Investing and Time Perspectives
			Investing and Motivational Systems
		Borrowing
			Psychological Dispositions and Borrowing
			Borrowing and Personality: The Big Five Model
			Borrowing and Self-Control
			Borrowing and Locus of Control
		Financial Cheating
			Psychological Dispositions and Financial Cheating
			Financial Cheating and Personality: The HEXACO Model
			Financial Cheating and Personality: The Big Five Model
			Financial Cheating and the Dark Triad of Personality
		Concluding Remarks
		References
	Chapter 8: Aging and Financial Decision Making
		Introduction
		Cognitive Deliberation and Age-Related Differences in Financial Decision Making
			Age-Related Differences in Cognitive Deliberation
			Age-Related Differences in Cognition and Motivation
		Experience-Based Knowledge and Age-Related Differences in Financial Decision Making
			Age-Related Differences in Experience-Based Knowledge
		Emotions and Age-Related Differences in Financial Decision Making
			Age-Related Differences in Emotion and Motivation
		Interventions
			Nudges
			Decision Aids
			Training
		Future Directions
			Measurement Issues
			Social Context of Financial Decisions
			Maturational Change Vs Cohort Differences
		Conclusion
		References
	Chapter 9: Financial Decision Making Under Uncertainty: Psychological Coping Methods
		The Uncertainty Challenge: Rational Models in an Irrational Market
		Lessons from Russell’s Turkey
		Under Uncertainty, Less Is More
		Reducing Uncertainty with Simple Heuristics and One-Reason Decision Making
		Demarcating Uncertainty with Decision Reference Points
		Implications for Thinking, Fast and Slow and the Dichotomy of Systems 1 and 2
		References
Part III: The Level of the Society
	Chapter 10: Stock Markets, Market Crashes, and Market Bubbles
		The Omnipresent Stock Markets Bubbles and Crashes
		Taxonomy of Stock Markets, Bubbles, and Crashes
		The Individual’s Experience of Extreme Market Events
		Typical Biases on the Stock Market
		The Role of Individual Differences on the Trading Floor
		Experimental Asset Markets
		Econophysics: What Social Scientists Could Learn from Physicists or the Other Way Round?
		Concluding Remarks
		References
	Chapter 11: Cognitive Processes Underlying Impaired Decision Making in Gambling Disorder
		From Harmonious to Obsessive Gambling Passion
		Gambling Disorder and Decision Making
		Impaired Cognitive Processes in Gambling Disorder
			Motor Response Inhibition
			Cognitive Flexibility
			Reactivity to Monetary Gains and Losses
			Hypersensitivity Toward Gambling-Related Stimuli
		Attentional Bias
		Implicit Associations
		Neural Cue Reactivity
		Self-Control Mechanisms Involved in Gambling Harm Reduction
		Concluding Remarks
		References
	Chapter 12: The Psychological Perspective on the Antecedents and Consequences of Consumer Borrowing
		Introduction
		Antecedents of Borrowing Decisions
			Consumption Desires and Borrowing
			Attitude Towards Borrowing
		Borrowing Decisions
		Consequences of Borrowing for Well-Being
			Satisfaction with Consumption
			Psychological Concomitants of Debt and Over-Indebtedness
		Concluding Remarks
		References
	Chapter 13: Tax Compliance: Research Methods and Decision Processes
		Introduction
		Tax Compliance: Theoretical Models and Determinants of Compliance
			Rational Choice Model
			Rationality and Anomalies
				Bomb Crater Effect
				Echo Effect
				Source of Income
			Behavioral Choice Model
				Mental Accounting
			The Social Contribution Dilemma
			Economic and Psychological Determinants of Compliance
				Knowledge, Attitudes, and Tax Morale
				Personal Characteristics: Demographics, Personal Values, and Norms
				Social Norms
				Perceived Fairness and Trust
				Motivational Postures
			Integration of Economic and Psychological Insights: The Slippery Slope Framework
		Methods in Tax Research
			Surveys
			Experiments
			Field Experiments
			Comparison of Methods
		Information Processing in Tax Decisions
			Eye Tracking
			Mouse Tracking: Mouselab and Mouse Tracker
				Mouselab
				Mouse Tracker
			Neural Techniques and Peripheral Psychophysiology
		Practical Implications
		References
	Chapter 14: A Psychological Perspective on Charitable Giving and Monetary Donations: The Role of Affect
		Introduction
			Affect as a Motivator of Charitable Giving
		Scope Insensitivity and Compassion Fade
			Limitations of the Affect System
			Iconic Victims and the Power of Affect to Motivate Charitable Giving
			Debiasing Scope Insensitivity and Compassion Fade
		Perceived Effectiveness and Pseudoinefficacy
			A Dual-Process Model of Pseudoinefficacy
			Debiasing Pseudoinefficacy
		Conclusions
		References
Index