How the brain makes financial descions - Business & Economics ...

How the brain makes financial decisions was the opening keynote speech of the 2013 Finance Down Under Conference. ?Delivered by the world-renowned expert in this field, Professor Peter Bossaerts (California Institute of Technology), the presentation described some of the intricate processes the brain uses to learn about risk and how they are linked to our every-day financial behaviour.

Studying neural activation patterns while people are making decisions provides a richer and more detailed view of finance than traditional approaches that focus purely on behaviour. It allows researchers to shed light on aspects of financial behaviour that are inaccessible with traditional methods, such as the computations the brain performs when people are making decisions.

Although this line of research is still in its infancy, Bossaerts? remarks made clear that existing theories of financial decision-making are often overly simplistic ? and sometimes misleading ? and that we will have to revise our understanding of how people make financial choices.

Professor Bossaerts insights set the tone for the Finance Down Under conference which since its inaugural conference in 2006 has rapidly obtained a prestigious international reputation. Every year finance academics that have shifted the barriers of understanding within this field convene at this unique conference.

Since it began 2006 Finance Down Under is managed by the Department of Finance within the Faculty

The conference builds a symposium around a ?vintage? work in finance that has withstood the test of time and continues to inspire research. This format and the stellar quality of the papers discussed (with only 21 selected from hundreds received) ensures academics who have ruptured existing thinking on finance such a Professor Bossaerts, Professor John Y Campbell (Harvard),?Professor Larry Epstein (Boston University) and? Professor Stanley Zin (New York University) are numbered among the attendees.

?Substitution, risk aversion and the temporal behaviour of consumption and assert returns: A theoretical framework? was the vintage finance paper that was placed under the microscope at the conference this year, while the sessions over the three days on subjects such as credit supply, credit ratings and shareholder control enjoyed unique insights.

The paper ?What a Difference a Ph.D Makes: More than Three Little Letters? attracted robust debate within the Educated Investing session while the best paper award was presented to the paper entitled ?Risk Aversion Sensitive Real Business Cycles.?

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Source: http://benews.unimelb.edu.au/2013/how-the-brain-makes-financial-descions/

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