BeFi meets DeFi: A behavioral finance approach to decentralized finance asset pricing

This systematic literature review summarizes the extant research in the Behavioral Finance (BeFi) and digital asset spaces to understand better the interactions of behavioral effects on the pricing of assets constructed, enabled, and exchanged in Decentralized Finance (DeFi) markets. We find that as...

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Bibliographic Details
Published in:Research in international business and finance 2023-04, Vol.65, p.101939, Article 101939
Main Authors: Bennett, Donyetta, Mekelburg, Erik, Williams, T.H.
Format: Article
Language:English
Subjects:
Behavioral finance
Biases
Cryptocurrencies
Decentralized finance
Heuristics
Investor attention
Investor sentiment
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Summary:This systematic literature review summarizes the extant research in the Behavioral Finance (BeFi) and digital asset spaces to understand better the interactions of behavioral effects on the pricing of assets constructed, enabled, and exchanged in Decentralized Finance (DeFi) markets. We find that asset pricing in these rapidly evolving markets is better explained through BeFi than through traditional finance (TradFi) theory. Investor attention, sentiment, heuristics and biases, and network effects interact to form a highly volatile and dynamic market. We offer a deterministic research framework with propositions for future research. We further provide investors with a theoretically and empirically supported structure to better inform their decisions through an understanding of BeFi applications to DeFi. [Display omitted]
ISSN:0275-5319
DOI:10.1016/j.ribaf.2023.101939