In this paper Richard Peterson demonstrates a relationship between investor psychology and security pricing around anticipated events. Taking a multidisciplinary approach, he pulls together research in the finance, psychology, and neuroscience literature.
AEdge Master Class 08 - presented by Richard Thaler, Sendhil Mullainathan and Daniel Kahneman.
From THE NEW PALGRAVE: A DICTIONARY OF ECONOMICS, L. Blume, S. Durlauf, eds., 2nd Edition, Palgrave Macmillan Ltd., 2007. The efficient markets hypothesis (EMH) maintains that market prices fully reflect all available information. Developed independently by Paul A. Samuelson and Eugene F. Fama in the 1960s, this idea has been applied extensively to theoretical models and empirical studies of financial securities prices, generating considerable controversy as well as fundamental insights into the price-discovery process. The most enduring critique comes from psychologists and behavioural economists who argue that the EMH is based on counterfactual assumptions regarding human behaviour, that is, rationality. Recent advances in evolutionary psychology and the cognitive neurosciences may be able to reconcile the EMH with behavioural anomalies.
An exchange of information on the advances of behavioral finance, market psychology and nonlinear market approaches. Founded in 2000 by Peter Greenfinch.
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By John Y. Campbell, Ph.D., Managing Partner, Arrowstreet Capital, L.P., Otto Eckstein Professor of Applied Economics, Harvard University.
The application of psychology to finance. The home of investment skeptic James Montier who has worked in the investment industry for the last 15 years and specializes in the application of psychology to finance. He is the author of two books (Behavioural Finance) and the forthcoming Behavioural Investing.
By Nassim Nicholas Taleb, published originally in the Journal of behavioural Finance.
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By Allan Timmermann and Clive W.J. Granger.
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By Andrew W. Lo, Dmitry V. Repin and Brett N. Steenbarger.
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Compiled by behaviouralfinance.net, this extensive collection of published research papers details the history of finance from 1955 to 1985 and includes direct links to the PDFs.
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By Robert Shiller. Abstract: The efficient markets theory reached the height of its dominance in academic circles around the 1970s. Faith in this theory was eroded by a succession of discoveries of anomalies, many in the 1980s, and of evidence of excess volatility of returns. Finance literature in this decade and after suggests a more nuanced view of the value of the efficient markets theory, and, starting in the 1990s, a blossoming of research on behavioral finance. Some important developments in the 1990s and recently include feedback theories, models of the interaction of smart money with ordinary investors, and evidence on obstacles to smart money.
By Eugene F. Fama writes: Market efficiency survives the challenge from the literature on long-term return anomalies.
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This course surveys research which incorporates psychological evidence into economics. Topics include: prospect theory, biases in probabilistic judgment, self-control and mental accounting with implications for consumption and savings, fairness, altruism, and public goods contributions, financial market anomalies and theories, impact of markets, learning, and incentives, and memory, attention, categorization, and the thinking process.
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By Panagiotis Andrikopoulos. Abstract: Modern Finance has dominated the area of financial economics for at least four decades. Based on a set of strong but highly unrealistic assumptions its advocates have produced a range of very influential theories and models. Nonetheless, in the last two decades a new academic school of thought has emerged that refutes the key assumption of a homo economicus; an assumption that represents the cornerstone for the development of the theory of efficient markets. The first empirical evidence against efficient markets in the mid-eighties signalled the beginning of a fierce debate between these two schools of thought. This paper gives an overview of the key arguments of these two distinctive academic doctrines.
By Keith Cuthbertson, Dirk Nitzsche and Hyde Stuart.
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A Presentation given by Andreas Calianos (Behavioral Capital LLC) at the March 25th 2008 meeting of QWAFAFEW - New York City.
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By Andrew W. Lo
By James Montier. How can behavioural finance inform the investment process? We have taken a hypothetical ‘typical’ large fund management house and analysed their process. This collection of notes tries to explore some of the areas in which understanding psychology could radically alter the way they structure their businesses. The results may challenge some of your most deeply held beliefs.
This virtual journal hopes to foster better decision-making and bridge the gap with other disciplines by investigating how various cognitive processes and emotional factors may hinder or contribute to optimal decision making in finance and related fields with an interdisciplinary perspective including: financial psychology, behavioral accounting, economic psychology, psychological economics, behavioral economics, behavioral law, organizational behavior, and behavioral marketing.
By Burton G. Malkiel.
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