Inefficient Markets: An Introduction to Behavioral Finance / Edition 1

by Andrei Shleifer

Overview

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 models of such markets. These models explain the available financial data more accurately than the efficient markets hypothesis, and generate new predictions about security prices. 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.

Product Details

ISBN-13:	9780198292272
Publisher:	Oxford University Press
Publication date:	04/20/2000
Series:	Clarendon Lectures in Economics
Edition description:	New Edition
Pages:	224
Product dimensions:	8.50(w) x 5.49(h) x 0.50(d)

About the Author

Andrei Shleifer is professor of Economics at Harvard University.

Table of Contents

Are Financial Markets Efficient? Noise Trader Risk in Financial MarketsThe Closed-End Fund PuzzleProfessional ArbitrageA Model of Investor SentimentPositive Feedback Investment StrategiesOpen Problems

Editorial Reviews

"An excellent academic discussion of [stock mispricing] and other behavioral influences in the stock market."—Jeff Madrick, New York Review of Books

"The only advanced undergraduate or graduate text available on the subject."—Jeffrey Wurgler, Yale School of Management

From the Publisher