Applied Behavioral Finance

The field of Behavioral Finance has developed in recent years with a goal of understanding and explaining how human emotions and cognitive processes (particularly cognitive errors) influence the movement of stock markets. While the field was originally explored by those interested in increasing their profits in the markets, analysis of the principles of this field show there is a broad applicability to a variety of everyday settings and decisions.

Applied Behavioral Finance combines the disciplines of psychology and economics to explain why people make seemingly irrational or illogical decisions when they spend, invest, save, and borrow money. Since psychology systematically explores human judgment, behavior, motivation, emotion, and well-being, it can teach us important facts about how human functioning differs from traditional rational economic assumptions.

Applied Behavioral Finance is a collaboration between Financial Planner, Justin A. Reckers, CFP, CDFA, AIF, and Psychologist, Robert A. Simon, Ph.D.. Reckers and Simon recognize and explore the interaction of economic theory and psychology in every day financial decisions. They have developed Applied Behavioral Finance by combining thier professional knowledge and experience with observations gathered from professional practice and the research of economists and social scientists around the world. The result is a practical and pragmatic way of conceptualizing the social, cognitive and emotional factors, biases and road-blocks that complicate financial decision-making. They have built a formula for recognizing the effects of emotional and cognitive bias in financial decisions, developed processes for removing, moderating and adapting bias when recognized and developed architecture for more economically “rational” decision- making processes.

From decisions to buy, sell, invest, save and borrow to applications in human resources, legal disputes and conflict resolution. They are Architects of Financial Decision-Making.


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