Description
Book SynopsisThe 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 ac
Trade ReviewOne 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. * Journal of Institutional and Theoretical Economics26/03/2003 *
Table of ContentsAre 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
