An Analysis of Artificial Intelligence in Behavioural Finance

Abstract

This research paper into the intersection of artificial intelligence (AI) and behavioral finance, addressing a critical yet underexplored dimension of contemporary financial decision-making. While many studies have extensively examined AI's implications across various sectors, the focus on its influence within behavioral finance remains sparse. The paper defines AI as a technology enabling machines to replicate human-like intelligence and explores its potential to influence investor behaviors and perceptions. Key behavioral finance concepts, such as mental accounting, herd behavior, anchoring, and self-rating, are analyzed to elucidate how AI could reshape financial decision processes. By situating AI within the context of behavioral economic theories, this paper aims to contribute a nuanced understanding of its socio-economic impact and raise awareness about the implications for future financial practices. Ultimately, this work advocates for a closer examination of AI's role in enhancing or distorting decision-making in the financial domain.