How cultural differences influence investor behavior
Abstract (Via SCU)
Behavioral finance has made important contributions to the field of investing by focusing on the cognitive and emotional aspects of the investment decision-making process. Although it is tempting to say that people are the same everywhere, the collective set of common experiences that people of the same culture share will influence their cognitive and emotional approach to investing. In this article, the author discusses the many cultural differences that may influence investor behavior and how these differences may influence the recommendations of a financial advisor.
Introduction (Via SCU)
I have asked several questions as I explored similarities and differences among people of various countries: Do propensities for risk, regret, and maximization vary by country of origin? Do they vary by gender and age? Do levels of trust and happiness vary by country? And the final question is whether the differences matter if a manager is working only with clients in the United States.
The questions relate to behavioral finance, which is the description of perceptions and behavior of people facing financial choices. In particular, behavioral finance helps describe the effect of those choices on individuals, their families, companies, and markets and then offers prescriptions for better choices.