The Cognitive Finance approach describes a new analytical and methodological concept for explaining real capital markets.
With insights we see more
"Cognitive Finance" describes a novel methodology for holistic understanding of economics and capital markets. The term is based on classical cognitive theory, but goes far beyond it: It integrates the latest findings from neuroscience and psychology and addresses the problem of limited human cognitive ability.
Scientific studies show that human individuals are subject to systematic biases when it comes to acquiring information, processing information and making decisions.
"Cognitive Finance" consequently serves to analyze, describe and explain real-world processes in economics and capital markets, explicitly incorporating neural limitations, cognitive deficits and boundedly rational behavior. This approach decisively extends and modernizes previous principles of economic and capital market research.
Read: "Cognitive Finance: Neue Sicht auf Wirtschaft und Finanzmärkte" sowie "Kapitalmärkte sind nicht länger eine abstrakte Black Box" (both available in German).
From Capital Market Theory to Cognitive Finance
"Cognitive Finance" sees itself as an innovative methodology for holistic economic and capital market research. The approach integrates state-of-the-art scientific findings and thus addresses serious explanatory deficits of standard economic models.
Although criticism concerning traditional paradigms of economic and capital market theory has been increasing for years, hardly any meaningful alternatives have emerged so far. Interesting perspectives are offered by explanatory models based on behavioral science, which take a large number of psychologically determined peculiarities into account and thus allow a new view of real capital markets. Such concepts are also known as behavioral economics ("behavioral finance"). While behavioral finance approaches provide a more realistic picture, they often lack a consistent methodological framework.
"Cognitive Finance" has the clear goal to overcome the existing deficits of current economic and capital market models.
"Cognitive Finance" breaks new ground for this purpose and refers to insights from evolutionary theory, systems theory and information economics. At the same time it integrates approaches of cognitive research and neuroscience. By means of networked analytics and an interdisciplinary scientific foundation, "Cognitive Finance" creates a comprehensive understanding of complex reality.
Thinking in cognitive spaces
FERI Cognitive Finance focuses on all longer-term trends and systemic developments of which a comprehensive picture of the future can be derived. To this end, the FERI Cognitive Finance Institute uses a multidimensional analysis approach that focuses on six elementary knowledge areas ("cognitive spaces").
The ongoing analysis and systematic linking of these six cognitive spaces results in a comprehensive, broadly networked picture of the future (big picture). The big picture and the scenarios derived from it serve to identify and better understand future trends in the global economy, the financial system and the capital markets.
This "thinking in cognitive spaces" requires an interdisciplinary research approach and the ability for holistic analytics, i.e. a cognitive methodology.
A new world view of interdependent systems
"FERI Cognitive Finance" is a methodology developed by the FERI Cognitive Finance Institute that analyzes relevant developments and long-term trends and condenses them into a holistic, interconnected and dynamic picture of the future (Big Picture).
The proprietary "FERI Cognitive Finance" approach uses complex analyses for this purpose, taking into account principles from systems theory and neuroscience. Relevant topics and issues are networked, taking into account multiple cause-effect relationships, which enables a "neural" analysis logic:
Central thematic fields ("objects of cognition") are neuronally linked and assigned to the six cognitive spaces via multidimensional synapses, which in turn are viewed as complex interdependent systems.
Within the framework of this neuronal system, content-related interdependencies, but also critical bifurcations and breaks both within and between the different cognitive spaces are explicitly identified and modeled. This applies to existing trends as well as to hybrid development paths or incipient "megatrends".
The innovative Cognitive Finance methodology thus enables not only a forward-looking perception and classification of strategic developments, but also the derivation of concrete environmental, future and risk scenarios on the basis of system dynamic analysis concepts.
Recognize more, achieve more
Based on its proprietary Cognitive Finance methodology, the FERI Institute continuously analyzes overarching trends and global developments of significant importance:
Based on a global topic map ("mission map") and focused on six central cognitive spaces, relevant developments are continuously captured and their impact and relationship networks are multi-dimensionally interconnected.
This neural analysis logic enables early recognition of significant currents, trends and scenario drivers, as well as an assessment of potential feedback and spillover effects on other areas.
"FERI Cognitive Finance" thus enables a deeper understanding and a significantly sharper and more comprehensive picture of the relevant factors driving and determining the economy, capital markets and society.
Herewith, the FERI Cognitive Finance Institute aims to identify emerging trends, trend changes or trend breaks at an early stage. This capability provides profound guidance in an increasingly complex world. In principle, the FERI Cognitive Finance Institute has a medium to long-term analysis horizon.
Depending on the issue, the FERI Cognitive Finance Institute uses an external research network with experts of different disciplines. The resulting analyses and studies serve as valuable information and as a basis for decision-making for entrepreneurs, investors and asset owners.
The FERI Cognitive Finance Institute also performs an important educational and early warning function for the interested public.
Head of Steering Board
FERI Cognitive Finance Institute