Abstract

This research aims to investigate a new approach of financial decision-making so-called

“Neurofinance” which comes recently to the centre of the many discussions as a new way to scholars
in management and accounting analyse more consistently some factors that affect the financial
decision-making. One of the main objectives of this paper is the development of a systematic review
adopted from Mousnad et al. (2014) by a search of neurofinance papers to organize the ideas,
methodologies, processes, and main issues addressed to this subject. The results showed a relevant
number of articles, which made direct contributions to the topic. The authors’ network shows a
scattering of the writers and only three of them has more than two public works regarding this topic.
After a review of all articles, it is concluded that the debate on neurofinance is still in the embryonal
stage, but their findings are getting attention from research centres around the world. Finally, the
present paper is important not only for the value of this systematic review, but also to become a guide
to assist scholars interested in deep diving in neurofinance, by promoting a broader overview about
what has been studied within this emerging field of finance, serving as a theoretical summary,
including advantages and disadvantages to start studies of neurofinance.

1. Introduction

During the last years, an increase of interest regarding the research related to cognitive neuroscience
can be seeing on applied social sciences. Particularly in finance, new forms of study are rapidly evolving
and challenging the financial market and investment (Tseng, 2006). Among these new forms, we can
find the Neurofinance field, which seeks to answer the decision-makers’ behaviour through tools of
neuroscience.

The financial decision-making is a cognitive process that leads to a choice and a renunciation by the
agent, and his experience and his logical reasoning based this choice. Within the context of Homo
Economics, this decision must be tied to the idea of bounded rationality postulated by Herbert Simon
(1947). Thus, this neoclassical vision, which also treats the agent as a black box “assumes that this
agent takes information and converts them into actions as if he were a computer that blindly applies
certain rules” (Preuschoff, Quartz, & Bossaerts, 2008, p. 76).

Moreover, the development of non-invasive techniques to study brain activity in the recent years
created a new phenomenon and a keen interest in the tools and neuroscience findings. These,
together with advanced statistic methods allowed researchers to make inferences about brain
functionality, creating a new pool of disciplines such Neuroeconomics, Neurofinance, Neurostrategy,
Neuromarketing, and others, with focus on investigation of the physiology of the neural circuits
involved in the many kinds of decisions with new experimental techniques available in neuroscience
(Armando Freitas da Rocha, Lima Filho, Costa, & Lima, 2013).

All these new approaches brought new advances to the financial decision-making research, who are
finding several interferences on rational decision process, which cannot be measured by the usual
finance approach, such as emotional factors (Lo & Repin, 2002), behavioural biases (Lo, 2005),
temporal discount (Zak, 2004), hormones influence (Hsu, Bhatt, Adolphs, Tranel, & Camerer, 2005)
and activation of certain brain areas that precede risky choice (nucleus accumbens) and other brain
area that precede riskless choice (insula) (Kuhnen & Knutson, 2005).
These seminal studies bring some light over old issues on rational expectation in financial decision
making, but none of them could reach it without joint work between experts in neuroscience and
scholars of management, decision making, and finance, “the valuable insights that emerge make it
increasingly likely that many of the key questions of finance looking inside the black box” (Preuschoff
et al., 2008, p. 93).

In this way, a systematic review is relevant to scholars and researchers in finance for three main
reasons: (i) due to the relevance of the topic, which are bringing a new approach to the finance field
using modern tools for studies of behaviour and brain, changing the locus of analysis from the
companies and markets to the individuals (and their brains).

About this Tseng (2006, p. 13) argues that the “major goals of neurofinance be to gain better
understanding of financial markets by identifying some physiological traits affecting trading behaviour
and trading results”; (ii) due to the rapid increase, especially in the last five years, of finance studies
with neuroscience tools and; (iii) it considers the interdisciplinary approach used in finance, using
concepts of neurobiology, neurochemistry and cognitive processes such as new technical frameworks,
looking through the new paradigms for the financial decision-making field of study that now are
involving cognitive neuroscience.

Thus, the question of this study was formulated as follow: Which is the Neurofinance status in financial
decision-making scientific publications and what is the research mainstream? To this proposal, it is
essential to investigate the flow of information and publication around the subject. In this sense,
Sampaio and Mancini (2007) emphasize that the indicators of production and dissemination of
scientific knowledge be also among the objectives of the studies in a systematic review.

The contribution of this paper is the unification of the main articles and researches done which use
the “Neurofinance” term to understand and organizing the types of studies, the approaches and, the
usage of neurofinance as keyword in some papers, seeking for better comprehension about the
confluence of these important fields of science (Finance and Neuroscience) which are representing a
significant step forward to the a better understanding of financial market dynamics vis-à-vis individual
behaviour.

The presented study is divided into seven sections: (1) this introduction; (2) essential theories
surrounding financial decision-making, neurofinance and the boundaries between neurofinance and
behavioural finance; (3) the methodology explanation applied for this systematic review; (4) the
discussion of some finding regarding the systematic review and implications for this research in
methodological and theoretical point of view in neurofinance culminating in a network of the authors
and co-authors and; (6) the conclusions of this review and further approaches for studies within
neurofinance.

2. Theoretical Framework

To build a theoretical foundation is important pursued the literature named as neurofinance but go a
step back and examine other literature referenced to those seminal articles, captured in this review.
This research took into consideration the most important aspects surrounding the topic, and the result
was: the necessity of a temporal review of main financial decision-making papers to understand their
movements, especially the change from the rational model to the behavioural model, and recently to
the neurological model; the understanding of what actually means neurofinance and; boundaries
between studies neurofinance and behavioral finance, due to the close relationship that both have
which often generates incongruences in referencing studies as neurofinance when in fact they are
behavioral finance studies and vice versa.

2.1. Decision-making in finance: From the rationality to the neural approach

The expected rationality of decision-makers connects to the concept of Homo Economicus that comes
from Stuart Mill (19th century). It pursuits the maximization of returns and minimization of risks for
each decision made. For the decision-making, rationality is a term that has many meanings, but in
philosophy, it means the conscious use of reason and logic (Da Rocha & Rocha, 2011). Therefore, a
process of rational decision-making must be grounded in logic, objectiveness, obeying to rationality,
and imposed rules. The homogeneity of the behavior of all economic agents is another ground premise
of Homo Economicus. This “rational man” is the core to develop models and get appropriate rational
and expected behavior that make easy mathematical modeling and allows the generalization of the
relationship between cause and effect in financial decision-making studies.

Looking the limited access to internal and external information to decision-making, Herbert Simon
(1947) introduced the boundary concept of rationality or Bounded Rationality, where the agent's
inability, both cognitive as for access to information, limits somewhat the level of rationality used for
decision-making. However, nevertheless, these theories of bounded rationality remain dissociating
reason from emotion. (Da Rocha & Rocha, 2011).

The bounded rationality brought financial and economic hypothesis, such Efficient Market Hypothesis
(EMH), Expected Utility Theory (EUT) and others, into a more realistic and practical approach and
allowed many economists to incorporate the bound rationality into their models of finance and
market behaviors successfully but still considering the limitation of cognition as a small, scarce
resource (Tseng, 2006). Shiller (2003) also pointed out the market volatility can be explained by EMH
and rational expectation only if risk aversion is close to unrealistically high levels.

The evolution of cognitive psychology in financial decision-making starts with the researches made by
Tversky and Kahneman (1974) that found several personal factors affecting the decision of the
individual (Kahneman & Tversky, 1984) and can receive effect by many internal and external variables
not straightly connected to the decision itself, but now that mental process takes place into the brain
(Kahneman & Tversky, 1979) and by their own individual's cognitive limitations (Kahneman, 2003).

This evolution brought a new concept called Neuroeconomics to the center of the academic world of
finance and economy, it is an interdisciplinary field that seeks to explain decision-making, (Glimcher,
Camerer, Fehr, & Poldrack, 2009) looking for several research methods such behavioral economics,
neuroscience, social and cognitive psychology and psychophysiology.

The neural approach of financial decision-making, nowadays known as Neurofinance, become more
evident with initial studies (Hsu et al., 2005; Kuhnen & Knutson, 2005; Lo & Repin, 2002) looking
beyond the psychological aspects and going deeper into the mind of the decision-makers. It had
created “a more realistic model of decision making and able to explain a much wide range of individual
economic behaviors” (Vasile & Sebastian, 2010, p. 726). On this way, neurological and
psychophysiological tools start to be used together with the games and experiments already used in
behavioral economics studies.

The basis of neuroscience put the human factor closer to finance science and, with the help of
neuroscientist, the financial decision-maker become to change from “the Homo Economicus to evolve
to the Homo Sapiens” (Thaler, 2000, p. 140).
2.2.Origin and etymology of the term neurofinance

The word was firstly used by David Edwards (2004), a term to empathize a new science that analyzes
financial markets using neurotechnology into trading behavior scenario, but as per Rocha et al. (2013)
the first studies directed related to neurofinance was conduct by Gehring and Willoughby (2002) using
electroencephalography (EEG) to analyze brain activity associated with financial decision-making in a
monetary gambling task. The research discovered that a “negative-polarity event-related brain
potential, probably generated by a medial frontal region in or near the anterior cingulate cortex, was
greater in amplitude when financial choice resulted in a loss than when it led to gain.”(Armando
Freitas da Rocha, Vieito, & Rocha, 2013a, p. 9).

Tseng (2006) was the first who shows neurofinance as a new field of study to bring additional answers
to behavioral finance and supports the Adaptive Market Hypothesis (AMH). After 2006, some scholars
start to use neurofinance as a keyword to identify scientific studies which use neuroscience and
psychophysiology tools to understand financial decision-making heterogeneity. Although
neurofinance terms are quite widespread in academic circles in the last five years, it was noticeable
that some researchers use the term as a keyword in studies that do not use indeed neuroscience tools,
which can confuse new research in the field.

Noteworthy that neuroscience is an interdisciplinary science, which has several disciplines that may
or may not have a more direct relationship with the problems of finance. Within the neuroscience
division given by Lent (2010), there is a particularly relevant field for finance scholars, the cognitive
neuroscience. "Cognitive Neuroscience deals with more complex mental abilities, usually typical of
the man, such as language, self-consciousness, memory, and others. It can also be called
Neuropsychology. (Lent, 2010, p. 6). Even with this seemingly plausible limitation, those limits
between neuroscientific disciplines are not much clear and sometimes it needs unification to another
level, for a deeper overview of finance issues.

Neurofinance is an interdisciplinary joint that evaluates the nervous system and the brain as the unit
of analysis, but not taking in consideration that investors are rational or irrational, but looking to the
brain regions used at the time when financial decisions are being made using some cerebral or
psychophysiological mappings equipment.

It emerged as a combined effort of neurosciences and finances to a better understanding the dynamics
of decision making, seeking a type of knowledge that includes neural mechanisms involved is benefit
and risk analysis (Armando F. da Rocha, 2013; Armando Freitas da Rocha & Rocha, 2011), so the
concern of neurofinance approach is the financial decisions and their reflections in the brain and can
be like a bridge between psychology, neurology and investors behavior (Sapra & Zak, 2008).

About the tools, neurofinance “using brain imaging technology, experimentally identifies the specific
neural substrates associated with acquiring and processing information related to financial
decision”(Gippel, 2013). There are several methods available to brain research including neurological
equipment such as: functional magnetic resonance imaging(fMRI), electroencephalography(EEG),
magnetoencephalography(MEG), transcranial magnetic stimulation(TMS) positron emission
tomography (PET), as well as psychophysiological equipment, like electrocardiogram (ECG or EKG),
galvanic skin response (GSR) and the Eye Tracking. Figure 1 shows an example of this brain images
that represents an fMRI output from the Kuhnen and Knutson (2005) showing the different areas of
the brain affects by gain versus loss and relative market value.

At last, as the behavioral finance in the recent past, neurofinance today is still passing through a
consolidation process to become a new sub-discipline within finance, and it is gaining ground with the
advance of new technologies and discoveries about the brain and incorporated into its framework.

2.3. Thin boundaries between neurofinance and behavioral finance

The searches conducted in the preparation of this systematic review showed that exist some
miscegenation of concepts when neuroscience is applied to finance. The first is clearly the inclusion
of neurofinance word within keyword or even in some abstracts in articles and papers that are related
to behavioral finance (Özkan & Özer, 2015; Rath, Mahapatra, & De, 2014).

An absorbing work made by Paysan-LeNestour and Bossarts (2012), despite it includes the term
neurofinance in the keywords, is an excellent example of a behavioral finance research, but the
inclusion of the term “neurofinance” happened due to some comparison made with studies in
neuroeconomics which use some neuroscientific tools, but without uses these on their research.

The incongruity between the neurofinance and behavioral finance, considering Gippel (2013)
approach, lies at the point, when scholars start to use the term neuroeconomics within behavioral
finance to give emphasis on the experimental methods that are more close to behavioral finance
studies.

The difference between behavioral finance and neurofinance is that the former investigates how
people act and interact in the process of making financial decisions and interpret these actions based
on established psychological concepts and theories, whereas the latter examines why and how these
behaviors occur based on the observations on people’s brain and hormonal activities (Tseng, 2006, p.
13)

In fact, the advances in neuroscience allowed the progress in behavioral finance research, but this
could not be mistaken for studies in neurofinance, these two approaches have different units of
analysis and various models. Neurofinance uses the brain as a unit of analysis. Instead, behavioral
finance uses the individual (Gippel, 2013). Gippel (2013) also used the Kuhnian concept of normal and
extraordinary science (revolution) to illustrate the emerging sub-disciplines in the integration of two
or more fields, as can be found in Figure 2.

The behavioral finance is now “the best-established challenge to the neoclassical paradigm” (Gippel,
2013, p. 11). The behavioral finance uses the cognitive psychology, which is a branch of psychology
that seeks to understand the internal mental processes of thought such as visual processing, memory,
thinking, learning, feeling, problem-solving, and decision-making, judgment, and language.(Kalra Sahi,
2012) Cognitive psychological perspective considers emotion as a product of the cognitive analysis of
a stimulus or event (Merkle, 2007) and uses a large number of experimental methods to find biases
and heuristics as well as another interference on rational.

It looks the individual as unit of analysis, “remains atomistic, acting in their self-interest of maximizing
wealth (Gippel, 2013, p. 12), so it is not so different in comparison to the rational paradigm, as opposed
to rational paradigm hitherto used by scholars, it uses decision biases and heuristics (Kahneman &
Tversky, 1979; Tversky & Kahneman, 1974), where different decisions get along from an individualized
construction of mental shortcuts and cognitive biases and culminated in the development of Prospect
Theory with a focus on the individual's cognitive limitations, representing a change on bounded
rationality. In fact, there are no clear boundaries between behavioral and rational approach, once
behaviorists continue to use rationalism as the center of the decision, the main difference is the
cognitive limitations that avoid the individual from doing so (Gippel, 2013; Harzer et al., 2016).

Nevertheless, the behavioral study in finance still lacks a unified theory that can turn into a model
which scholars could accept as a new paradigm of financial science (Gippel, 2013), but still remain
important due to the large number of findings made through research that dispense, for some reason,
the neuroscience tools, but remain using psychological tools, research and experiments to analyze
human behavior in situations involving finances. Therefore, the behavioral finance should not be a
step towards neurofinanças, but another sub-discipline of finance to walk together with neurofinance.

However, despite all this odds, financial decision-making is a large field to use new tools, which shows
interest in how the individual act out of an expected and “normal” behavior.

The notion of market efficiency, whereby the prices of risky assets reflect all publicly available
information is heavily (if not entirely) reliant on the assumption of rationality […]. Relaxing the
assumption of perfect rationality has wideranging implications for financial markets, including the
predictability of asset returns, liquidity, bubbles, and crashes (Sapra & Zak, 2008, p. 6).

To access the brain, as previously mentioned, research with merge neuroscience and financial
decision-making involves fMRI analysis or others brain scanning process. Other techniques measure
brain-relevant physiological techniques are also relevant to brain studies, such as hormone studies
that have used blood draws before, during and after a task to measure the levels of hormones related
to various human emotions such as stress or attachment. Some studies have employed measurements
of skin conductance response. Skin conductance response measures autonomic arousal, reflecting
underlying emotional(Morris, 1998). Other studies have introduced hormones to measure effects on
subsequent tasks (Barraza & Zak, 2009).

One of the major differences in neurofinance approach is that rationality is not assumed, it is
measured, and bringing necessary changes in rational paradigms used today in finance and even the
behavioral finance.

By comparison between neurofinance and behavioral finance, not only the rationality changes but
also the unit of analysis, which becomes the brain and not the individual and the implications
normative implications, more in line with improving efficiency in processing information instead of
providing an education in the case of behavioral finance or even improve the efficiency of information
on the rational expectations (Gippel, 2013).

3. Research methods

The approach of this systematic review comes through a descriptive research, where the researcher
“take notes, records, analyzes and correlates events or phenomena without manipulating
them”(Cervo & Bervian, 2002, p. 66). The use of systematic review technique is necessary because this
research followed a plan to meet pre-defined questions and relies on methods outlined to search
systematically and evaluation studies of a given subject (Castro, 2001; Dalazen et al., 2016). A
systematic review starts from a clear question followed by an appropriate definition of bibliographic
search, adequacy of inclusion and exclusion criteria of work already done on the subject, all of this in
order to develop a critical analysis of a field of study, mapping it in relation to the theory, in its
methodological approaches and results obtained up to a specific point.

The data collection and analysis followed the following steps, corresponding to the systematic review
adopted from Mousnad et al. (2014):

a) Definition of expressions used in search engines. The terms "Neurofinance" or “Neuro-finance” or

“Neuro Finance” were defined and entered into the search engine of the sources consulted. The
studies need to fulfill the following characteristics:

i) The study must have at least one of following outcomes: Neurofinance reference on Title or
Abstract or Keywords, as well as papers that use cognitive neuroscience tools to evaluate risk decision-
making within a finance approach;

ii) Non-primary research articles that were published only as abstracts, book chapters, commentaries,
letters, and citations. The process excluded books in this review;

iii) Studies should are in scientific journals and conference proceeding, excluding thesis, dissertation,
and working papers to get only revised material;

iv) Studies must contain at least title or abstract or keywords, in English, which the term
“Neurofinance” or “Neuro-Finance” or “Neuro Finance”.

b) Search methods for the identification of articles. Were select four databases to perform this review:
Scopus®1, ScienceDirect®2, Web of Science®3 and Google Scholar®4, which results in a primary 386
articles as can be seen figure 3. The initial search happened on November 20th of 2015. Despite the
high reliability in the searches on here, referred base, additional searches were also made directly in
the top journals, aimed at collecting articles that may be out of search engines between November
20th of 2015 and December 3rd of 2015;

c) Definition of the period. To get all the articles using the term neurofinance were not defined, a
priori, a period of search, however, we found that the vast majority of articles published after 2006
when the term “Neurofinance” was firstly used by Tseng in (2006)5.

d) Selection of published articles and papers in the databases chosen;

e) Indexation of articles that showed the expression set to the search. A pre-developed data
abstraction sheet was used to organize the results with the following columns: Search Engine, Study
Title, Author(s), Country, Language, Year, Journal, Volume, Issue (See Appendix I);

f) Analysis of findings and main contributions of articles;

g) Built an authors’ network. To verify the degree of proximity between the authors and their
respective networks, we used the UCINET software.

It is important to know that a systematic review includes reading several excerpts from an article,
considering not only an overview into the keywords and the abstracts, but also a full reading of each
paper looking at their methods, conclusions and results This is essential in order to categorize their
content to bring meaning to the researcher interested in investigating this particular field of study.
Thus, this review only considered as appropriate to the interests of this study those articles and
researches that passed through a review of their topics or even a was completed reading putting them
in the context which permeating the field of neurofinance.

4. Data Presentation and Analysis

Figure 3 shows the structure of determining studies’ eligibility, for this review. The search found 386
references in four articles’ repository previously choose. Out of these 386 studies, only 22 (20 articles
and two congress proceedings) coming from the filter adopted and another seven from the inclusion
of some working papers which bring valorous finding on neurofinance, in APPENDIX I is possible to see
the final list of suitable articles related to the neurofinance field.

It is important to explain that from the 51 studies showed on the Figure as “Citation, Commentaries,
Letters and Others” 11 are Broken links or paper that the author of this systematic review did not have
any access.

These studies are spread in several countries, taking into account the location of the main author’s
university or research center of each paper, the concentration is actually in the United States (n=10)
represents 35% of the entire production in neurofinance approach, followed by Brazil (n=3) and Japan
(n=3), other 13 studies are scattered in other 10 countries as shown in the Table 1.

The review of each article brought critical findings of studies with neurofinance reference. Table 2
shows a detailed (albeit subjective) breakdown of research methods of the studies above selected.
This division was made primarily by Tufano (2001) and updated by Gippel (2013). The research
methods related to neurofinance were determined using the methods and proposals given by the
authors of the 29 studies reviewed.

Essentially most research is focused in Literature Review (44.8% n=13), and only 27% (n=8) are
Experiments and Simulations, over these four studies use fMRI as a neuroscientific tool, two using
EEG, and one uses psychophysiological equipment (GSR and ECG for example.). The last one is a
behavioral finance study which uses an experiment without any neuroscience machinery (Özkan &
Özer, 2015), but it fulfills the criteria to be eligible for this systematic review because it uses word
neurofinance in a behavioral finance research which denotes the need for improvement of boundaries
between these two sub-disciplines.

The Statistical Methodology papers concentrated Takahashi’s studies about Tsallis statistics, but
Paysan LeNestour and Bossaerts (2012) applies statistical methods to a behavioral approach, this
article

passed through the filters because its references in the abstract and keywords, but within the work
was just pointed out that the studies in neuroscience could bring more reliable results over behavioral
analysis made there.

Two papers with Empirical Analysis method have a behavioral finance study (Rath et al., 2014) with
references to neurofinance as a possible way to address problems of suboptimal outcomes resulting
from the irrational decision-making, and a meta-analysis study over fMRI results in neuroeconomics
using ALE meta-analysis in 28 studies.
This research was organized by Wu et al. (2015) “identified for meta-analysis via a search of the
PubMed database using key phrases [mean] OR [reward] OR [expected value] OR [variance] OR [risk]
OR [uncertainty] OR [skewness] AND [finance] OR [monetary] AND [human] AND [FMRI]. […] and
identified 248 studies…”(Wu et al., 2015, p. 4).

The findings of Wu et al.(2015) show high mean, variance and skewness in moments that promised
substantial gains linked to the nucleus accumbens and moments that threatened significant losses
(high variance) activated the anterior insula, eliciting different patterns of neural activity between gain
and losses, exactly the same findings of Kuhnen and Knutson (2005).

Additionally, Figure 4 shows a graph of the articles between the years of publication, which showed
rapid growth, from 2010 the number of publications related to this subject. Importantly, the oldest
study (Lo & Repin, 2002) entered within the search criteria just to be a neurofinance study and for
appearing in search engines, but neurofinanças terms do not appear within the article.

Another important fact is that all studies that use of neuroscience and psychophysiology tools
emerged from 2010, indicating that not only the issue of novelty of the topic, but also the novelty in
the use of neurofinance as a term to delimit the search field of these studies, since the number of
papers that already use the same tools since the beginning of early of this century.

About the relevance of the thematic, the impact factor was analyzed. Considering the 29 studies in
this review, 12 were in journals with SCImago Journal & Country Rank (SJR). The average impact factor
of these 12 articles, considering the final classification of the journals to which they were submitted,
was 0.87, and the median of the quartiles stay as Q2. In Table 3 is demonstrated with journals were
found in SJR and the respective quartile and IF for each one, in APPENDIX I is possible finding the
relation of articles and journals.

5. Discussion and implication of neurofinance on finance studies

The discussion and the implications of neurofinance, due to its embryonic stage within the field of
applied social sciences, still lacks a better understanding of their research methodologies and on the
theories necessary for proper research in finance. The relevance of familiar tools of neuroscience and
theories and to know what the most relevant articles and studies on the phenomenon under study
are passes first by constantly doing a systematic review due to the theme of novelty indicated in Figure
4.

As discussed previously some early studies and even some newer ones that combine neuroscience
and financial decision-making, do not directly use the word neurofinance as the central topic, which
hampers search on the matter and turns the possibility for systematic review more difficult and
intricate.

Therefore, to work properly the processes defined in neurofinance is following the standpoint from
(Gippel, 2013) to refer new studies using neuroscience, but without discrediting any previous works,
as example of good reference of neurofinance we highlight the work done by Frydman and colleagues
(2012, 2014; 2015; 2014) as they tackle the subject neurofinance and use neuroscience tools indeed
and is the study of brain as being the research locus.
5.1 Main theoretical and methodological contributions of this research

The most recent studies involving neurofinance brought significant methodological contributions in
the field. In this set, Gippel (2013) made an important segmentation using a Kuhnian perspective of
the emerging sub-disciplines in finance, giving the proper treatment and differentiation between
studies of behavioral finance and neurofinance. However, the author points out that, despite this
division made, there are some interconnections between other disciplines as well as indirect and
complementary links between them. This significance was observed in various studies listed in this
review because they had both neural and behavioral approach.

Shariff et al. (2012) gave valuable insights about the quantification of feeling and thoughts, the
possibility quantification of these issues can really boost the improvement of equations about financial
decision-making by the usage of neuroscience techniques, despite all the references to the
irrationality in several articles that deal with decision-making, but this important variable is not
measured. The evolution of the behavioral finance brought some way to capture these feelings and
thoughts, but without including them as variables of a formula, but as part of the error.

Neurofinance researchers fall into two broad categories: understanding the neural processes that are
involved in decisions which are stated by the standard finance theories; and find out the reasons for
the failure of these theories (Kalra Sahi, 2012), This is important to settle new research in finance.

It is essential to the comprehension by the new researched a framework that shows the evolution of
financial decision-making brings some light to the different approaches. Kalra Shari (2012) built a
timeline looking from Markowitz approach that he called as “Standard Finance Theories” until the
ultimate emerging sub-discipline of neurofinance as can be seen in Figure 5.

About methodological contribution, this review showed a 60/40 concentration of qualitative work (17
qualitative works against 12 quantitative works). Only a small group of papers are indeed experiments
and simulations with neuroscience tools (20% / n=6) that use fMRI, EEG to evaluate financial decision-
making. The main point about these articles relies on the useful results that neural data obtained
through fMRI and EEG to test financial theories.

As an example, Frydman et al. (2012) identify the by fMRI that neural predictions of realization utility.
The findings also help to understand who the brain works: “at the moment a subject issue a command
to sell a stock at a gain, there is a sharp rise in activity in the ventral striatum, an area of the brain that,
based on recent research in cognitive neuroscience, is known to encode feelings of subjective
pleasure.

The use of fMRI denotes some additional expertises which full comprehension about how to get and
analyzes the outputs of an fMRI. To collect data on neural activities is used the BOLD-fMRI, stands for
blood-oxygenated level dependent functional magnetic resonance imaging.

It measures changes in local magnetic fields that result from local inflows of oxygenated hemoglobin
and outflows of de-oxygenated hemoglobin that occur when neurons fire. FMRI provides measures of
the BOLD response of relatively small “neighborhoods” of brain tissue known as voxels and is thought
to measure the sum of the total amount of neural firing into that voxel as well as the amount of
neuronal firing within the voxel7. (Frydman et al., 2012, p. 21)
Beyond that, EEG tools are also being used to evaluation which part of the brain are activate seconds
before and during a financial decision-making in men and women, explicating that despite no evidence
of different success on the financial decision between men and women, the EEG showed that male
and female used different sets of the neuron. (Da Rocha, Vieito, Massad, Da Rocha, & Lima, 2015;
Vieito, Pownall, & Da Rocha, 2014).

In statistical methodology Takahashi and colleagues (2014; 2007, 2009) to help in future studies on
neuroeconomics, behavioral finance and neurofinance by bringing additional model by “using
probabilistic choice model based on a mathematical equivalence of delay and uncertainty in
decisionmaking, and the deformed algebra developed in the Tsallis’ non-extensive
thermodynamics”(Takahashi, 2007, p. 337), with also can be utilized to quantify a perceived value of
an uncertain reward (Takahashi, 2009) and to subjective probability for delayed reward(Takahashi et
al., 2014).

5.2.Network

By using UCINET® software, the network of authors was drawn up aiming at checking the degree of
closeness between them as can be found in Figure 6. However, it had shown that using neurofinance
as a term of search; there is a concentration around three main authors, Frydman (four studies), Da
Rocha (three studies) and Takahashi (three studies).

The network around these authors is showing not only the relevance of them but also the type of
studies they do, Frydman (Frydman et al., 2012, 2014; Frydman & Camerer, 2015; Frydman, 2014) his
studies on financial decision-making using fMRI and behavioral finance together, and it brought
several other authors to work close with him. Takahashi (Takahashi et al., 2014; Takahashi, 2007,
2009) works with statistical methodology Tsallis and is demonstration how it can be used in
neurofinance and behavioral finance.

At last, the broad network built by the Brazilian Armando Freitas da Rocha (Da Rocha et al., 2015; Da
Rocha, Lima Filho, et al., 2013; Da Rocha, Vieito, & Rocha, 2013b) together with the Portuguese Paulo
Vieito (Vieito et al., 2014) are exploring the EEG and doing some important theoretical essays with the
central theme of the changes and the impact on studies in finance with the emergence of
neurofinance.

Figure 6 represents networks and their interconnections. To a better understanding, the red circles
are the main authors of the articles and squares in blue are coauthors. The size of the shapes
represents how many articles authors and coauthors have. A deep analysis was not possible due to
the small number of ties and the dispersions about not linked studies and scholars.

6. Final Considerations

The construction of this article aimed to contribute to the international literature on neurofinance
topic, by the exploration of the themes and building a network of authors to help researchers who
want to increase their comprehension about neurofinance.

Additionally, like others before that, this paper does not exhaust or settles the discussion about with
really is Neurofinance, but of the contributions was to point out the need for other quantitative and
experimental studies related to the neurofinance, since actual discoveries, even without a huge
exploration, are contributing to a better understanding of the human behavior on decision making
and what differentiates people decision from each other.

There are limitations about this review related to the term neurofinance because the novelty of the
term. Some researchers may just be avoiding use this term because they are already accustomed to
using neuroeconomics. Thereby, a further systematic review including another range of keyword
would be beneficial since some leading researchers in cognitive neuroscience and finance might be
doing studies connected to neurofinance, but without reference them in their keywords or abstracts
clearly. This new systematic review could improve the author’s network and bring additional findings
to finance.

Another relevant point about the findings in neurofinance was the large Brazilian share in this
thematic, together with researchers from Portugal, which also they are bringing advances in the study
of financial decision-making with the help of EEG as previously approached, besides fostering good
theoretical review on the topic (Da Rocha, 2013; Da Rocha, Vieito et al., 2013b).

The main conclusion by reading those articles it the despite all this appeal and primacy by this new
way to do studies in finance, some issues still need to be addressed and treated, both in the scientific
field as in the social area and market. Also, the indiscriminate use of these tools and findings without
proper scientific rigor may create a sense of fallacy, bring even harder to the acceptance of
neurofinance by the academics.

About the issues on neurofinance studies, some scholars still looking with skepticism this emerging
field of finance, “because it cannot be considered science […] neurofinance is based mainly on
laboratory experiments, […] lack of external validity is perhaps the most important reservation that
people can have about laboratory experiments” (Vasile & Sebastian, 2010, p. 726).

The high cost that evolves the use of neurological machines is also a limiting factor in the research in
neurofinance. Also, other neuroscience limitations lie: in concern around the neuroscience tools; in
the fusion problems between neuroscience and decision-making in management (and
notwithstanding in finance) and; in the issue of practical applicability of neuroscience. (Ward, Volk, &
Becker, 2015).

Frydman et al. (2012) emphasize that the neuroscience methods be hardly a substitute for
traditional empirical methods in finance, serving more as a complement to be used together with
behavioral experiments. “In particular, we see neural data as a valuable resource when studying the
more psychological dimensions of individual investor behavior, precisely because these may derive
from variables that are only observable at the neural level”(Frydman et al., 2012, p. 37).

On the other hand, many findings of empirical test on behavioral finance are encountering
strong statistical evidence by the use the fMRI, which is also helping to locate the regions of the brain
where these processes are actually worked, such “investors do experience regret when receiving
information that indicates a trading decision is ex-post suboptimal”(Frydman & Camerer, 2015, p. 20)
and providing support for the realization utility model (Frydman, 2014).

Finally, the present paper is important not only for the value of this systematic review, but also to
become a guide to assist scholars interested in deep diving in neurofinance, by promoting a broader
overview about what has been studied within this emerging field of finance, serving as a theoretical
summary, including advantages and disadvantages to start studies of neurofinance.
Conflict of Interests

The authors declare that there is no conflict of interests regarding the publication of this paper.