Weekend Reading: You’ve Heard About Behavioral Finance. But What About Physical Finance?

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
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Weekend Reading

Behavioral finance explains how your emotions and cognitive biases influence your financial decision-making. As a result, this can create greater self awareness in helping you make better investment decisions. However, the story doesn’t end there.

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What is “PhyFi”? Physical finance examines the relationship between finance and various physical factors, such as weather patterns and solar activity. This article explores the connection between neuroscience and behavioral finance, indicating that certain neural pathways and chemicals in your brain can significantly influence your financial behavior. For example, higher levels of cortisol have been correlated with more aggressive risk-taking behavior.

Impacts of Mother Nature: Further, studies on seasonal affective disorder (SAD) have shown a lack of sunlight during winter months can contribute to a reduced risk appetite. New research suggests that stock market patterns and returns can be influenced by the amount of sunlight in different markets, with decreased risk appetite in darker regions during winter. Beyond this, solar activity, specifically geomagnetic storms, were found to have a negative effect on stock returns in the following week.

Are you truly feeling a pull to exit the market or are other changes in the physical world at play? While physical finance research is in its early stages, these are factors to consider as you elevate your investment decision-making skills.