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Emotions in financial markets

Lookup NU author(s): Professor Darren DuxburyORCiD


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Over recent decades, research in financial markets documents the important role of emotions in financial markets. This article reviews the results of (i) studies of correlations between market performance and proxies of emotions related (e.g., investor sentiment) or unrelated (e.g., weather) to the economy/market, (ii) field studies of investors’ emotions and investment/trading behavior observed in the market or assessed retrospectively by interviews, and (iii) experiments using emotion-inducing techniques to study the effects of emotions on simulated investment/trading behavior. We conclude that emotions normally are significant ingredients of rational decision making in financial markets but may under some circumstances cause biases.

Publication metadata

Author(s): Gärling T, Duxbury D

Editor(s): Nikolaos Apergis

Publication type: Book Chapter

Publication status: Published

Book Title: Reference Collection in Social Sciences - Encyclopedia of Monetary Policy, Financial Markets and Banking

Year: 2023

Online publication date: 11/08/2023

Acceptance date: 06/07/2023

Publisher: Elsevier

URL: .

DOI: 10.1016/B978-0-44-313776-1.00088-X