How behavioural finance seeks to explain real-world financial decisions intrigues me because it sheds light on contradictions to theories such as the Efficient Market Hypothesis that assumes investors make rational decisions.
As the globalisation of financial markets continues to transition from traditional to behavioural finance theories, it is asserted that cognitive, emotional, and social dimensions can explain human decision-making processes, so the perception and response of individuals remain significant.
A 2020 survey of 503 professionals who have not yet received behavioural finance training but are considering doing so underscores the importance of finance undergraduates researching this paradigm shift.
These articles are intriguing because they illustrate how one’s financial literacy awareness, attitude, and behaviour needed to make financial decisions can be influenced by seemingly uncontrollable behavioural characteristics such as personality traits.
Chhatwani (2022), hereby referred to as (1), seeks to establish a relationship between financial literacy, personality attributes, and mortgage delinquency ((1) p. 486). Exley et al. (2022), henceforth referred to as (2), investigated how
Latent Profile Analysis (LPA) predicted financial outcomes, expanding beyond the Big Five personality traits to examine personality profiles. Both studies inexplicitly present research questions, but it is evident that demonstrating the importance of personality traits is at the heart of their respective investigations.
Despite not differing geographically and employing the Five Factor model identically, they differ in their data collection methodologies, analytical models, research variables, and descriptive statistical representations.
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