#Why Neuro-finance

#RATIONAL THINKING
■ It pursuits the maximization of returns and minimization of risks for each decision
made.
■ in philosophy, it means the conscious use of reason and logic
■ Therefore, a process of rational decision-making must be grounded in logic,
objectiveness, obeying to rationality, and imposed rules.
■ The homogeneity of the behavior of all economic agents is another ground premise
of Homo Economicus.
■ This “rational man” is the core to develop models and get appropriate rational and
expected behavior that make easy mathematical modeling and allows the
generalization of the relationship between cause and effect in financial decision-
making studies.
#HUMAN ARE NOT COMPUTER
factors

#Emotional factors
#Behavioral biases
#Temporal discount
#Hormones influence
#Activation of certain brain areas that precede risky choice
#Other brain area that precede riskless choice
#Boundary concept
#neuro-finance
■ Neurofinance is an interdisciplinary joint that evaluates the nervous system and the
brain as the unit of analysis, but not taking in consideration that investors are
rational or irrational, but looking to the brain regions used at the time when financial
decisions are being made using some cerebral or physiophychological mappings
equipment.
■ It emerged as a combined effort of neurosciences and finances to a better
understanding the dynamics of decision making, seeking a type of knowledge that
includes neural mechanisms involved is benefit and risk analysis (Armando F. da
Rocha, 2013; Armando Freitas da Rocha & Rocha, 2011), so the concern of
neurofinance approach is the financial decisions and their reflections in the brain
and can be like a bridge between psychology, neurology and investors behavior
(Sapra & Zak, 2008).
■ About the tools, neurofinance “using brain imaging technology, experimentally
identifies the specific neural substrates associated with acquiring and processing
information related to financial decision”(Gippel, 2013).
Methods

■ Functional magnetic resonance imaging (fMRI),

■ Electroencephalography (EEG)
■ Magnetoencephalography (MEG)
■ Transcranial magnetic stimulation (TMS)
■ Positron emission tomography (PET)
■ psychophysiological equipment,
– electrocardiogram (ECG or EKG)
– galvanic skin response (GSR)
– the Eye Tracking
Behavioral finance v/s Neuro Finance

■ Behavioral finance investigates how people act and interact in the process of
making financial decisions and interpret these actions based on established
psychological concepts and theories,
■ Neuro finance examines why and how these behaviors occur based on the
observations on people’s brain and hormonal activities
■ Neuro-finance uses the brain as a unit of analysis.
■ behavioral finance uses the individual
Limitations

■ accustomed to using neuroeconomics.

■ No Theoretical framework
■ Neurofinance is based mainly on laboratory experiments
■ Cost
■ Extension
#Why Neuro-finance
thank- you