Emotional Finance: The Impact of Emotions on Investment Decisions

Authors

Leef H. Dierks, Technical University of Applied Sciences LübeckFollow
Sonja Tiggelbeck, Technical University of Applied Sciences LübeckFollow

JEL Code

D87, D11, D14

Abstract

Emotions have a decisive influence on individual investment decisions and thus on market developments. Collective behavior, which often prevails in markets, can trigger the development of speculative bubbles as, more often than not, investors rely on trust in an attempt to reduce the uncertainty and complexity prevailing in markets. Based on the developments surrounding German financial services provider Wirecard in 2020, this contribution explains why retail and institutional investors decided to trust the company's narrative in an attempt to reduce uncertainty, despite increasingly obvious large-scale accounting inconsistencies.

Recommended Citation

Dierks, Leef H. and Tiggelbeck, Sonja (2021) "Emotional Finance: The Impact of Emotions on Investment Decisions," Journal of New Finance: Vol. 2: No. 2, Article 3.
DOI: 10.46671/2521-2486.1019
Available at: https://jnf.ufm.edu/journal/vol2/iss2/3

Submission Date

6-2-2021

Approval Date

6-10-2021

Publication Date

7-7-2021