Research Review: Mental Accounting

Rob Hamshar  |  Portfolio Construction Forum  |  30 July 2020  |  1.00 CE

Humans categorise and form stories about their world - including their financial lives - to aid cognitive processing and decision-making. Many researchers have argued that the processes underlying mental accounting are conceptually equivalent to the psychological processes of categorisation and, relatedly, the formation of mental schemas, scripts, and preferences. Many errors that arise in mental accounting are because categorisation inevitably comes with the risk of mis-categorisation - and the stories we tell ourselves can be misleading.

The first paper, published in 2018, ...

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