scholarly journals The conflict negativity: A neural correlate of value conflict and indecision during financial decision making

2017 ◽  
Author(s):  
Gesa-K. Petersen ◽  
Blair Saunders ◽  
Michael Inzlicht
Keyword(s):  
Stock Options ◽  
Preliminary Evidence ◽  
Value Conflict ◽  
Decision Conflict ◽  
Financial Decisions ◽  
Subjective Value ◽  
Financial Decision ◽  
Brand Perception ◽  
Private Investors ◽  
Conflict Negativity

AbstractIndividuals struggle when making financial decisions, sometimes preferring to avoid difficult decisions and receive lower future rewards over actively deliberating between options of similar value. Here, we examine how conflict deriving from objective and subjective value characteristics of stocks, as well as the behavioural and phenomenological correlates of decision conflict, are accompanied by variation in a thus far understudied ERP component, the conflict negativity (CN). In a novel EEG paradigm (N = 53), we simulated a financial decision situation in which participants made incentivized choices between different, sometimes conflicting, stock options. Our results indicate that participants become slower, more undecided, and less pleased, when choosing between similar options compared to choices in which one option clearly outweighs the other. This effect even held when participants chose between two objectively good alternatives. We further provide preliminary evidence that the CN, a negative-going ERP recorded over the medial prefrontal cortex, is not only sensitive to decision conflict, but also predicts behavioural indecision. What is more, subjective value characteristics of stocks, impressions based on brand perception of the stock options, modestly influenced affective and behavioural reactions over and above objective stock characteristics. While our results are at odds with assumptions made by classic economic theory, they may serve as one out of several indicators as to why private investors seem to avoid financial decisions.

scholarly journals The conflict negativity: Neural correlate of value conflict and indecision during financial decision making

2017 ◽  
Author(s):  
Gesa-Kristina Petersen ◽  
Blair Saunders ◽  
Michael Inzlicht
Keyword(s):  
Stock Options ◽  
Preliminary Evidence ◽  
Value Conflict ◽  
Decision Conflict ◽  
Financial Decisions ◽  
Subjective Value ◽  
Financial Decision ◽  
Brand Perception ◽  
Investor Behaviour ◽  
Conflict Negativity

Individuals struggle when making financial decisions, sometimes preferring lower future rewards over actively making decisions at all. Here, we examine how conflict deriving from objective and subjective value characteristics of stocks, as well as the behavioural and phenomenological correlates of decision conflict, are accompanied by variation in a thus far understudied ERP component, the conflict negativity (CN). In a novel EEG paradigm (N = 53), we simulated a financial decision situation in which participants made incentivized choices between different, sometimes conflicting, stock options. Our results indicate that participants take longer, are more undecided and less pleased, when choosing between conflicting options compared to choices where one option is obviously better than the alternative—even when choosing between two objectively good alternatives. We further provide preliminary evidence that the CN, a negative-going ERP recorded over the medial prefrontal cortex, not only reacts to conflict decisions but also predicts participants’ behavioural indecision during choice. What is more, subjective value characteristics of stocks, impressions based on brand perception of the stock options, influenced affective and behavioral reactions over and above objective stock characteristics. While our results are at odds with assumptions made by classic economic theory, they can be applied to real world observations on private investor behaviour.

scholarly journals Impact of financial statements for financial decision-making

2020 ◽  
Vol 5 (2) ◽  
Author(s):  
Saddeq Abdulshakour
Keyword(s):  
Decision Making ◽  
Relative Weight ◽  
Financial Statements ◽  
Decision Makers ◽  
Financial Statement ◽  
Financial Decisions ◽  
Financial Decision Making ◽  
Vision 2030 ◽  
Study Population ◽  
Financial Decision

The study aimed to know the effects of analysis of financial statements on financial decisions, and the degree of benefit from them, and to identify what financial statements, what is its importance for the institutions within the framework of the Kingdom's Vision 2030 of ideas and trends, and to identify the contribution of financial statement analysis to financial decision-making. The study was based on the descriptive and analytical approach, and the study population consisted of all financial decision makers. The study was based on a simple random method (70) of financial decision makers. The study was based on the questionnaire and consisted of the following axes (financial statements in companies, financial decision-making, the effects of analysis of financial statements on financial decision-making). The study came out with a number of results, the most important of which are: There is approval by the respondents to all paragraphs of the first axis "financial statements in companies", with a relative weight of 82.8%. There is an agreement by the respondents on all paragraphs of the second axis "making financial decisions in companies", with a relative weight of 81.3%. There is strong approval by the respondents on all paragraphs of the third axis "the effects of analysis of financial statements on financial decision-making", with a relative weight of 86.4%. The financial statements are a key tool to know the financial position of the company, so they must be accurate and reliable before being published by management. The lack of credibility in the financial statements leads to mistrust in the company by investors, and does not give them the possibility to diagnose and make sound decisions. In light of the previous results, the study recommended the following: • Organizing several forums, conferences and forums to clarify the mechanism of preparing the financial statements and how to analyze them, and the need to raise awareness of financial decision makers about the importance of financial statements in the financial decision-making process.

scholarly journals Gender Differences in Financial Decisions

2018 ◽  
Vol 11 (1) ◽  
pp. 21-27
Author(s):  
Jeetendra Dangol
Keyword(s):  
Gender Differences ◽  
Decision Making ◽  
Financial Literacy ◽  
Sampling Technique ◽  
Financial Decisions ◽  
Financial Decision Making ◽  
Financial Decision ◽  
Convenience Sampling ◽  
Risk Taker ◽  
Survey Questionnaires

This paper examines the gender differences in financial decision-making of university students who are young, single, childless individuals that have at least average financial literacy and very small or no income. This paper is based on the survey questionnaires developed by Grable and Lytton (2003), distributed and collected from 100 students (50 men and 50 women) by using convenience sampling technique. The study finds that men and women differ in their financial decision. Women are less risk taker than men in financial decision-making; it indicates that women prefer to safer investment.

Finanzielle Bildung in der Schule oder am Arbeitsplatz? Eine Synthese und kritische Würdigung aktueller Forschungsbefunde

2021 ◽  
Vol 90 (1) ◽  
pp. 45-60
Author(s):  
Carmela Aprea
Keyword(s):  
Financial Education ◽  
Good Time ◽  
Substantial Contribution ◽  
Financial Decisions ◽  
Financial Decision ◽  
Education Interventions ◽  
Learning School ◽  
Economic Developments ◽  
Wissenschaft Und Politik ◽  
Research And Policy

Zusammenfassung: Vor dem Hintergrund gegenwärtiger gesellschaftlicher, politischer und ökonomischer Entwicklungen sowie damit einhergehender Anforderungen an die finanzielle Entscheidungsfähigkeit wird der finanziellen Bildung breiter Bevölkerungsschichten in der aktuellen politischen wie auch wissenschaftlichen Diskussion eine hohe Bedeutung beigemessen. Da es sich jedoch um ein relativ junges Forschungsgebiet handelt, ist bislang noch nicht abschließend geklärt, ob und unter welchen Bedingungen finanzielle Bildung überhaupt einen substanziellen Beitrag zu besseren Finanzentscheidungen leisten kann. Offen ist dabei unter anderem auch, welches ein geeigneter Lernort bzw. damit zusammenhängend ein guter Zeitpunkt für Finanzbildungsmaßnahmen ist, wobei insbesondere die beiden Lernorte ,Schule‘ und ,Arbeitsplatz‘ diskutiert werden. Mit diesem Themenkomplex beschäftigt sich der vorliegende Beitrag, dessen Zielsetzung darin besteht, aktuelle konzeptuelle und empirische Forschungsbefunde zur finanziellen Bildung in der Schule und am Arbeitsplatz zusammenfassend darzustellen sowie einer kritischen Würdigung zu unterziehen, um auf dieser Basis Schlussfolgerungen für Wissenschaft und Politik abzuleiten. Summary: Against the backdrop of current social, political and economic developments and the associated demands on financial decision-making skills, the financial education of broad sections of the population is accorded great importance in the current political and academic debate. However, as this is a relatively new field of research, it has not yet been conclusively clarified whether and under what conditions financial education can make a substantial contribution to better financial decisions. Among other things, it is still unclear which is a suitable place of learning and, in this context, a good time for financial education interventions, whereby the two places of learning ’school’ and ’workplace’ are being discussed in particular. This article deals with this issue and aims to summarize current conceptual and empirical findings on financial education in schools and at the workplace, and to critically assess them in order to draw conclusions for research and policy.

Trust and Household Portfolios

2021 ◽  
pp. 78-97
Author(s):  
Diego Lubian
Keyword(s):  
Financial Markets ◽  
Empirical Evidence ◽  
Financial Literacy ◽  
Risky Assets ◽  
Financial Decisions ◽  
Portfolio Decisions ◽  
Financial Decision ◽  
Financial Portfolio ◽  
Socio Demographic Factors ◽  
The Relationship

This article provides empirical evidence on the existence and the extent of the influence of trust in financial decisions using individual data on Italian households from the Survey on Household Income and Wealth, 2010. This article studies the relationship between, trust in people, trust in banks and more detailed previously unexplored dimensions of trust, and household financial portfolio decisions. The article provides empirical evidence that trust in people and trust in banks affect both participation in financial markets, the share of risky assets and the diversification of the financial portfolio, controlling socio-demographic factors, risk aversion, and financial literacy as well. The article finds that trust is important for individuals with a lower level of education who have limited possibilities to acquire and process information on financial markets need to rely in trustworthy relationship to define their financial portfolio. Further, we present evidence that the main channel by which trust affects financial decision making and determines too little participation, a lower share of risky assets in the financial wealth and poorly diversified portfolios is trust in family and friends.

scholarly journals FINANCIAL DECISION MAKING SELF-EFFICACY IN COGNITIVELY AND FINANCIALLY VULNERABLE OLDER ADULTS

2019 ◽  
Vol 3 (Supplement_1) ◽  
pp. S477-S478
Author(s):  
Evan Z Gross ◽  
Rebecca J Campbell ◽  
LaToya Hall ◽  
Peter Lichtenberg
Keyword(s):  
Alzheimer’S Disease ◽  
Older Adults ◽  
Alzheimer's Disease ◽  
Decision Making ◽  
Cognitive Impairment ◽  
Self Efficacy ◽  
Clinical Samples ◽  
Financial Decisions ◽  
Financial Decision Making ◽  
Financial Decision

Abstract Financial decision making self-efficacy (FDMSE) is a novel construct that may influence how older adults make financial decisions. Our previous research with a community sample of older adults demonstrated that cognitive functioning and suspected history of financial exploitation were both associated with low FDMSE. We sought to replicate these findings in two clinical samples of older adults: people with mild cognitive impairment (MCI) or probable Alzheimer’s disease (PAD) and current victims of scams or exploitation as determined by a financial coach. Samples were obtained from the Michigan Alzheimer’s Disease Center and a financial coaching intervention study. All participants completed a 4-item FDMSE measure. One-way ANOVAs, t-tests and chi-square tests were conducted to test for group differences with controls on demographics. There was a main effect of cognitive status on FDMSE, F(2,138) = 8.10, p < .001, which was driven by higher FDMSE in the healthy group (N = 63) than the MCI (N = 76) or PAD (N = 28) groups. Similarly, scam victims (N = 25) had significantly lower FDMSE than non-exploited (N = 25) peers, t(48)=2.33, p < 05. Cognitive impairment and current financial scams are both associated with low FDMSE levels. Low FDMSE may exacerbate cognitive and psychosocial vulnerabilities that contribute to risk for poor financial decisions among older adults. Future interventions to enhance FDMSE may help older adults make better decisions despite changes in thinking abilities or previous negative financial experiences.

Review of Family Financial Decision Making: Suggestions for Future Research and Implications for Financial Education

2017 ◽  
Vol 28 (2) ◽  
pp. 253-267 ◽  
Author(s):  
Jinhee Kim ◽  
Michael S. Gutter ◽  
Taylor Spangler
Keyword(s):  
Decision Making ◽  
Decision Process ◽  
Family System ◽  
Financial Education ◽  
Future Research ◽  
Financial Decisions ◽  
Individual Level ◽  
Financial Decision Making ◽  
Financial Decision ◽  
The Individual

This article reviews the theories and literature in intrahousehold financial decisions, spousal partners and financial decision making, family system and financial decision process, children, and financial decisions. The article draws conclusions from the literature review and discusses directions for future research and educational programs. Most financial education and counseling takes place at the individual level, whereas financial decisions take place at household and intrahousehold levels. Family members, spouses/partners, children, and others play a key role in individuals’ financial decisions. The article proposes the key programmatic implications for financial professionals and educators that need to be integrated into financial education and counseling. Understanding the unique dynamics of family financial decision making would help create effective educational and counseling strategies for the whole families.

scholarly journals Social Comparisons are Associated with Poorer and Riskier Financial Decision Making, no Matter whether Encounters are Sporadic or Repeated

2016 ◽  
Vol 19 ◽  
Author(s):  
Alfonso Barrós-Loscertales ◽  
Antonio M. Espín ◽  
José C. Perales
Keyword(s):  
Decision Making ◽  
Social Interaction ◽  
Financial Risk ◽  
Social Comparisons ◽  
Social Conditions ◽  
Financial Decisions ◽  
The Social ◽  
Binary Choices ◽  
Social Encounters ◽  
Financial Decision

AbstractPrevious research suggests that social comparisons affect decision making under uncertainty. However, the role of the length of the social interaction for this relationship remains unknown. This experiment tests the effect of social comparisons on financial risk taking and how this effect is modulated by whether social encounters are sporadic or repeated. Participants carried out a computer task consisting of a series of binary choices between lotteries of varying profitability and risk, with real monetary stakes. After each decision, participants could compare their own payoff to that of a counterpart who made the same decision at the same time and whose choices/earnings did not affect the participants’ earnings. The design comprised three between-subjects treatments which differed in the nature of the social interaction: participants were informed that they would be matched with either (a) a different participant in each trial, (b) the same participant across all trials, or (c) a “virtual participant”, i.e., a computer algorithm. Compared to the non-social condition (c), subjects in both social conditions (a and b) chose lotteries with lower expected value (z = –3.10, p < .01) and higher outcome variance (z = 2.13, p = .03). However, no differences were found between the two social conditions (z = 1.15, p = .25 and z = 0.35, p = .73, respectively). These results indicate that social comparison information per se leads to poorer and riskier financial decisions, irrespective of whether or not the referent other is encountered repeatedly.

scholarly journals RATING ASSESSMENT IN MAKING FINANCIAL DECISIONS BY METHODS OF MULTI-CRITERIA ANALYSIS

2021 ◽  
pp. 60-71
Author(s):  
Lesya Berezhna ◽  
Oksana Snytuk
Keyword(s):  
Evaluation Criteria ◽  
Assessment Tools ◽  
Topsis Method ◽  
Management Decisions ◽  
Financial Strategy ◽  
Banking Services ◽  
Financial Decisions ◽  
Financial Decision ◽  
Multi Criteria Analysis ◽  
Banking Institution

The article attempts to reveal the problems of decision support processes by consumers of banking services. Choosing the best financial strategy always requires significant mathematical tools. The comparison of methodological tools for making management decisions has allowed us to identify groups of methods. The most common among them are game theory, multidimensional ranking and multi-criteria analysis, a fairly modern method exploring alternative options using multi-objective optimization without certain shortcomings of the first two methods. The main purpose of the study is to adapt the methods of multi-criteria analysis and to form universal tools to substantiate management decisions on the optimal financial strategy. We suggest a methodological approach based on the use of multi-criteria assessment tools, for the rating assessment of possible alternatives in making financial decisions, namely Smart method to determine the weighting factors of the evaluation criteria and TOPSIS method to assess the optimum banking institution from the perspective of bank depositors. The article pays special attention to highlighting and describing the hierarchy of the task of choosing a depository financial institution and the main features of strategic alternatives. To assess the banks’ ratings we set up the system of generalized criteria including three groups, each of which by means of decomposition is divided into 11 partial criteria, which have monotonically increasing target functions (except for "additional associated costs"). Initial data in the form of a constructed "decision matrix" according to certain particular criteria are formed on the basis of statistical and expert information. We have chosen the end of 2020 ‒ beginning of 2021 as the research period for utilizing up-to-date information. The research of rating assessment in the article is carried out in the following logical sequence: analysis of existing methods of financial decision-making support and the significance of modern methods of multi-criteria analysis among them, a thorough problem statement from the perspective of the banks’ services consumers, singling out the list of alternatives and their estimation criteria, substantiating the values of the weighting coefficients of generalized and particular criteria by the SMART method, practical application of the TOPSIS method algorithm to select the best alternative and recommendations for making a financial decision. Therefore by means of mathematical calculations the article justifies the choice of the optimum strategy by a consumer of financial services of the banking institution offering the most attractive conditions for opening an account. Thus, the study empirically confirms and theoretically proves that the use of modern economic and mathematical methods, in particular the TOPSIS method, helps the consumer of banking services in supporting of making well-considered and optimum management decisions, taking into account the previously set evaluation criteria.

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