Investor Sentiment in the Stock Market
Malcolm P. Baker
Harvard Business School; National Bureau of Economic Research (NBER)
NYU Stern School of Business; National Bureau of Economic Research (NBER)
Journal of Economic Perspectives, Vol. 21, No. 2, pp. 129-151, Spring 2007
NYU Working Paper No. FIN-11-026
The history of the stock market is full of events striking enough to earn their own names: the Great Crash of 1929, the ’Tronics Boom of the early 1960s, the Go-Go Years of the late 1960s, the Nifty Fifty bubble of the early 1970s, the Black Monday crash of October 1987, and the Internet or Dot.com bubble of the 1990s. Each of these events refers to a dramatic level or change in stock prices that seems to defy explanation. The standard finance model, in which unemotional investors always force capital market prices to equal the rational present value of expected future cash flows, has considerable difficulty fitting these patterns. Researchers in behavioral finance have therefore been working to augment the standard model with an alternative model built on two basic assumptions.
Number of Pages in PDF File: 23Accepted Paper Series
Date posted: December 15, 2011
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