Mathematical Behavioural Finance

Narrative

Research undertaken at the University of Manchester (UoM) has contributed to the development of a new interdisciplinary field, ‘Mathematical Behavioural Finance’ (MBF), that deals with mathematical models of financial markets based on behavioural principles. These models go far beyond the conventional paradigm of fully rational utility maximization, and reflect a whole variety of patterns of market behaviour. A particular emphasis is on evolutionary aspects: growth, domination or just survival, especially in crisis environments.
Impacts can be seen in investment strategies based on MBF that have been successfully employed in large scale funds, since 2008, by Swiss and German corporate investors (AllMountain Capital AG and Deutsche Bank). These strategies have demonstrated high rates of return combined with relatively low volatility, coping exceptionally well with one of the most severe financial crises in recent history.

Impact date	2014
Category of impact	Economic impacts, Societal impacts
Impact level	Benefit