This book is available in Oxford Scholarship Online
| Reviews |
| - 'One of the very first books on behavioural finance ... covers some of the most important ideas in behavioural finance ... a rich source of empirical facts and new ideas, waiting to be further explored in financial economics ... Every financial economist, in particular those being trained in the classical finance school, should read this high-level book on behavioural finance. It is full of
provocative and inspiring ideas that will keep your mind busy for many hours. I am sure this excellent book will become a classic in behavioural finance.' - 26/03/2003
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| Description | | - Clarendon Lectures in Economics
- Challenges the central tenets of established finance theory
| The efficient markets hypothesis has been the central proposition in finance for nearly thirty years. It states that securities prices in financial markets must equal fundamental values, either because all investors are rational or because arbitrage eliminates pricing anomalies.
This book describes an alternative approach to the study of financial markets: behavioral finance. This approach
starts with an observation that the assumptions of investor rationality and perfect arbitrage are overwhelmingly contradicted by both psychological and institutional evidence. In actual financial markets, less than fully rational investors trade against arbitrageurs whose resources are limited by risk aversion, short horizons, and agency problems. The book presents and empirically evaluates models
of such inefficient markets.
Behavioral finance models both explain the available financial data better than does the efficient markets hypothesis and generate new empirical predictions. These models can account for such anomalies as the superior performance of value stocks, the closed end fund puzzle, the high returns on stocks included in market indices, the persistence of stock price
bubbles, and even the collapse of several well-known hedge funds in 1998. By summarizing and expanding the research in behavioral finance, the book builds a new theoretical and empirical foundation for the economic analysis of real-world markets. |
Readership: Researchers and academics in economics and finance. Professional economists. Graduate students and advanced undergraduates in finance.
| Contents |
Are Financial Markets Efficient?
Noise Trader Risk in Financial Markets
The Closed-End Fund Puzzle
Professional Arbitrage
A Model of Investor Sentiment
Positive Feedback Investment Strategies
Open Problems
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| Authors, editors,
and contributors |
Andrei Shleifer, Professor of Economics, Harvard University
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