5. Household Investment Decisions

  1. H. Kent Baker and
  2. Victor Ricciardi
  1. Vicki L. Bogan

Published Online: 1 MAR 2014

DOI: 10.1002/9781118813454.ch5

Investor Behavior: The Psychology of Financial Planning and Investing

Investor Behavior: The Psychology of Financial Planning and Investing

How to Cite

Bogan, V. L. (2014) Household Investment Decisions, in Investor Behavior: The Psychology of Financial Planning and Investing (eds H. K. Baker and V. Ricciardi), John Wiley & Sons, Inc., Hoboken, NJ, USA. doi: 10.1002/9781118813454.ch5

Author Information

  1. Associate Professor, Cornell University

Publication History

  1. Published Online: 1 MAR 2014
  2. Published Print: 31 JAN 2014

ISBN Information

Print ISBN: 9781118492987

Online ISBN: 9781118813454

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Keywords:

  • household finance;
  • investment behavior;
  • market frictions;
  • behavioral biases;
  • stock market participation

Summary

Within the area of finance, most basic theoretical models do not fully describe true household investment decision-making behavior. This is due in large part to the fact that most traditional finance models are based on the assumptions that financial markets operate without frictions and that all people make perfectly rational decisions. Yet, when one considers how academic models are applied in the real world, these fundamental assumptions do not always hold. This chapter discusses how market frictions and specific behavioral biases actually influence household investment behaviors.