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The Matrimonial StrategistLJN NewslettersNewsSections

Behavioral Finance

By Justin A. Reckers and Robert A. Simon
October 28, 2010

Behavioral Finance is a practical and pragmatic way of conceptualizing the social, cognitive, and emotional factors that influence financial decisions during a divorce.

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. Behavioral Finance combines the disciplines of psychology and finance 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.

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