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De Neve, J. & Fowler, J. (2014) argue that the MAOA gene negatively impacts serotonin function, critical for impulse control, thus creating a pronounced association with the need for reward. Keeping Up with the Joneses is both common phraseology and a construct used to describe the acquisition of something material to elevate one’s status to match that of a peer. The argument is elaborated by stating that there is intrinsic value in the display of an acquisition, thereby affirming an elevated social standing (Siegel, L. & Wang, D., 2018). The authors add that the millennial generation further perceives experiences as valuable to advancing social status, even over material goods in some cases. The pursuit of Keeping up with the Joneses presents complications when considering income disparity (Fligstein, N., et al., 2017). The authors add that the cost of goods associated with an elevated status are more burdensome for those facing income disparity because of consumer demand and bidding: defined in this context as a compulsion for lower income populations to pay for goods in lieu of elevated prices set by higher income earners. As a result, those facing income disparity who elected to consume the goods, as opposed to those who abstained, acquired deeper debts. Armantier, O., et al., (2022) adds that inflation only exacerbates this disparity in income, making it more challenging for lower income earners to achieve a particular social status, and subsequently more likely to become indebted, and experience feelings of deprivation.

Keeping Up with the Joneses consists of a persistent cycle of preserving and elevating one’s lifestyle. As indicated, this act often comes at a considerable cost to the individual, resulting in potentially negative consequences including, but not limited to indebtedness. Although personal choice (Fligstein, N., et al., 2017) is a component to impulsive behaviors such as spending, De Neve, J. & Fowler, J. (2014) offer the notion that impulsive borrowing could be curbed if lenders considered genotype in their decisions. This solution fits the authors’ overall argument that impulsive acts of spending, as characterized by Keeping Up with the Joneses, is the result of a behavioral deficiency instead of environmental factors. The conclusion that genetic attributes contribute in part or whole to impulsive spending, and a willingness to accumulate debt, warrants further research. Specifically, the known effects of MAOA on impulsive behaviors gives research ample cause.

References

Abdallah, K., Bittar, T., Checknita, D., Cote, G., Gigek, C., Golden, S., Labonte, B., Lopez, J., Maussion, G., Meaney, M., Mechawar, N., Navarro, L., Nestler, E., Neve, R., Quessy, F., Russo, S., Turecki, G., Yang, J. & Yerko, V. (2020). Regulation of impulsive and aggressive behaviours by a novel lncRNA, Molecular Psychiatry, 26, 3751-3764. https://doi.org/10.1038/s41380-019-0637-4.

Armantier, O., Filippin, A., Neubauer, M. & Nunziata, L. (2022). The expected price of keeping up with the Joneses, Journal of Economic Behavior & Organization, 200, 1203-1220. https://doi.org/10.1016/j.jebo.2020.07.022.

De Neve, J. & Fowler, J. (2014). Credit card borrowing and the monoamine oxidase A (MAOA) gene, Journal of Economic Behavior & Organization, 107, 428-439. http://dx.doi.org/10.1016/j.jebo.2014.03.002.

Dibb, S. Fenton-O’Creevy, M. & Furnham, A. (2018). Antecedents and consequences of chronic impulsive buying: Can impulsive buying be understood as dysfunctional self-regulation? Psychol Mark, 35, 175-188. https://doi.org/10.1002/mar.21078.

Fligstein, N., Goldstein. A. & Hastings, O. (2017). Keeping up with the Joneses: How Households Fared in the Era of High Income Inequality and the Housing Price Bubble, 1999–2007. Socius: Sociological Research for a Dynamic World, 3, 1-15. https://doi:10.1177/2378023117722330.

Siegel, L. & Wang, D. (2018). Keeping up with the joneses: Emergence of travel as a form of social comparison among millennials. Journal of Travel & Tourism Marketing, 36(2), 159-175. https://doi.org/10.1080/10548408.2018.1499579.

Tajmaus

Behavioral Finance: Investor Data and Behavior

Investor data and behavior have always interested finance professionals and researchers. Behavioral finance focuses on the psychological and emotional variables that influence investor decisions and has increased in prominence in recent years. Investors may not always make sensible judgments; their actions and emotions may substantially impact their investments. We can learn much about how investors make judgments and why they occasionally make poor decisions by looking at these characteristics. This knowledge can assist us in creating strategies to overcome these biases and enhance the performance of our investments. Behavioral finance emphasizes the value of considering human behavior when making financial decisions and provides an engaging framework for investigating the interesting and frequently unpredictable realm of investment psychology.

Current Trends

How Investor Data Affects Behavior

Investors consider various factors, including market trends and the performance of their investments, in line with their financial objectives to make decisions. Similar to other factors affecting it, such as perception and experience, accessibility of investment data contributes substantially to determining investment behavior (Adil et al., 2022). Investors who examine historical data on market trends and individual investments can make informed investment decisions. By utilizing this data to identify patterns and trends in investor behavior, financial professionals can enhance their ability to develop more effective investment strategies.

The Role of Emotions in Investment Decisions

Emotions majorly affect the investor's actions which influence decisions made in finance. For instance, greed and fear are some of the emotions identified that influence investment decisions. Concerned investors may sell off their investments before the right time due to fear of financial loss leading to considerable losses (Kumari et al., 2022). However, overconfidence in one's ability may lure inexperienced or even experienced investors into taking risks beyond their means (Abdesslem et al., 2022). This can eventually lead to significant monetary loss.

Herd Behavior and Its Consequences

Investors that engage in herd behavior prefer to mimic the conduct of others versus coming to their independent conclusions. Numerous things can motivate this behavior, including the need to fit in, the worry about missing out on chances, and the impact of the media and other information sources (Gupta & Shrivastava, 2022). However, herd behavior can have serious repercussions when it results in bubbles and market crashes. By understanding the factors that contribute to herd behavior, financial professionals can develop strategies to mitigate its impact.

 How to Make Better Investment Decisions

Making better investment decisions requires a comprehensive understanding of investor behavior and its influencing factors. By examining historical data, identifying patterns in investor behavior, and developing effective investment strategies, financial professionals can help investors make more informed decisions (Mittal, 2022). Professionals can also assist investors in controlling their emotions and avoiding herd behavior traps. Making decisions based on sound financial concepts, remaining educated, and remaining objective are ultimately the keys to better investing selections.

Future Research

Research uncovers many fascinating features of how people behave in ways that impact financial markets as they learn more about behavioral finance. Based on the results of the five studies, several prospective study areas would be worthwhile researching. Future studies may look into how herd behavior affects financial markets. For instance, investor psychology's role in asset pricing. In particular, investors tend to follow the crowd, creating speculative bubbles (Adil et al., 2022). Further research could explore how to prevent the formation of bubbles and how to mitigate their impact on financial markets.

Another area of research could be to examine the impact of stereotypes on risk preferences. Stereotypes may influence financial professionals when predicting risk preferences. Future research could explore how stereotypes affect decision-making in financial markets and how to mitigate their impact. Path dependence on risky choices is another area that warrants further exploration (Gupta & Shrivastava, 2022). Affective and deliberative processes play a significant role in risky decision-making. Further research could investigate how to balance affective and deliberative processes to make better decisions in financial markets.

The impact of technology on individual investor behavior is another area that deserves further attention. Behavioral biases cause individual investors to perform worse than the market (Mittal, 2022). Future research could examine how technology can support people in making better investment decisions as it continues to disrupt financial markets. Emotions significantly impact financial decision-making (Kumari et al., 2022). Further research could investigate how to manage emotions in financial markets to make better investment decisions.

Conclusion

The growing field of behavioral finance could help better understand investor decision-making. As behavioral finance develops, practitioners and scholars must keep up with the latest developments. Investors can make better selections and enhance their overall investment success by being aware of these biases and how they may affect investment decisions. By utilizing the insights offered by behavioral finance, investors can increase their prospects of long-term financial success by making more educated and logical investing decisions.

References