Integrating Neuroeconomics Insights Into Financial Decision Making: A Comprehensive Review

Abstract

This survey shows the complications of brain and financial decision-making interactions in Neuroeconomics and Neurofinance. Financial choices are mostly assumed to be rational, but they are quite evidently prone to mechanisms, both neural and psychological. Its main brain areas are the nucleus accumbent, ventral striatum and amygdala that deal with risk and reward processing, and neuroimaging studies are related to prefrontal cortex and limbic system functions as analytical and emotional information processing respectively. Particular attention is given to the way in which emotions and cognitive biases lead the actions of an agent to go outside the typical models in traditional economics, including the Rational Choice Theory, applied by the review. It promotes the use of rational and irrational elements in explaining financial behaviors and proposes approaches to reducing the percentage of irrational decision making by using financial education and informed policy. Such a multidisciplinary approach of neurology and economics has a potential to be used further in decision-making.

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