Emotional Finance: a New Paradigm

15:03, Tue 3 Jan 2012

Professor Richard Taffler delivers his Inaugural lecture 'Emotional Finance: a New Paradigm' The new area of emotional finance studies how financial decisions are largely driven by people’s emotions and associated unconscious needs, fantasies and fears. By formally recognizing the key role unconscious forces play in investment decisions, and market behavior more generally, emotional finance offers a new perspective on many aspects of financial activity not well explained by traditional economic and financial models. In his inaugural lecture, Professor Taffler introduced this nascent discipline which is beginning to be quite widely accepted by practioners as a valid description of their own experience. In particular he explored such issues as the unconscious meanings holding stocks can have and the resulting attachments and conflicting feelings and fantasies that result, group behaviour in markets, the key role mental defences play, asset pricing bubbles such as dot.com mania, and financial crises including the recent sub-prime debacle and its aftermath. Importantly, Richard explained how stockmarket investing, traditionally described as being about “greed, fear and hope” is better characterized as being about “excitement, anxiety and denial”. Finally he poinedt out the key role stories play in setting market prices and suggest conventional valuation methods may be viewed on one level as largely rationalizations.

(M4V format, 234 MB)

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