Improving Financial Decision Making With Unconscious Thought: A Transcendent Model

Abstract

This article explains that a more rational and optimal approach to financial decision making than is proposed by finance theories alone would be that includes unconsciousness into the process. The total cognitive decision making capacity of an individual is comprised of both a conscious component and an unconscious component; and these two components are complementary and compensatory to each another. A decision-making process that integrates these two components would, therefore, first generally improve the quality of decisions, and second reduce the unfavorable impact of behavioral biases (with overconfidence, heuristics, etc as examples) on decision making.

Keywords:

• Conscious thought
• Unconscious thought
• Decision making
• Behavioral biases

Notes

¹Quoted in Dijksterhuis, 2004