Financial behavior and behavioral finance: differences and similarities

Abstract

This article discusses the analysis of the foreign literature representatives’ theoretical approaches towards studying the financial behavior and behavioral finance. The purpose of this work is to develop ideas about financial behavior, as well as to identify the similarities and differences between aspects of financial behavior and behavioral finance. The topicality of the article takes place in the insufficient elaboration of theoretical aspects of financial behavior, when in the contemporary conditions, the researchers outside of Russia started studying the concept of financial behavior and behavioral finance simultaneously in three sciences: psychology, sociology, and finance. As a result, it becomes necessary to study the specifics of financial behavior and behavioral finance. The goal of the study required a comparative analysis between the concepts of financial behavior and behavioral finance, as well as asidentification of similarities and differences. The results of the analysis show that financial behavior, being one of the types of economic behavior, is any human behavior that is related to the money management. The financial behavior is inherent in the subjects of both of the schools traditional and behavioral finance. The former, during the money management, rely on the rationality, while the latter — on the irrationality. In turn, behavioral finance is an interdisciplinary subject based on theories and methods of research from a wide range of decision-making areas, such as psychology, sociology, and finance. Financial behavior is an object of study simultaneously on several sciences, including economics, sociology, psychology, and behavioral finance among others. The similarity between financial behavior and behavioral finance lies in the fact that both concepts relate to the subject’s behavior, and they both are the subject of several areas of study, such as financial, sociological, and psychological theory.