The IUP Journal of Applied Economics
Neurofinance and the Efficient Market Hypothesis

Article Details
Pub. Date : Oct, 2020
Product Name : The IUP Journal of Applied Economics
Product Type : Article
Product Code : IJAE21020
Author Name : Kavous Ardalan
Availability : YES
Subject/Domain : Economics
Download Format : PDF Format
No. of Pages : 15



The purpose of this paper is to emphasize the implication of neurofinance with respect to the efficient market hypothesis. To this end, the paper first brings to the fore two aspects of neurofinance, namely, thinking imposes strain on the mind, and making judgment involves emotions, as a result of which some individuals introduce noise to financial markets. The paper then discusses the role of noise traders in making financial markets inefficient.


Neurofinance is an emerging transdisciplinary field that uses neuroscientific measurement techniques to identify the neural substrates associated with financial decisions. Neurofinance intends to go beyond behavioral finance1 as it promises to identify the physiological causes underlying deviations from neoclassical utility maximizing behavior.

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