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http://ssrn.com/abstract=327880
 
 

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A Survey of Behavioral Finance


Nicholas Barberis


Yale School of Management; National Bureau of Economic Research (NBER)

Richard H. Thaler


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

September 2002



Abstract:     
Behavioral finance argues that some financial phenomena can plausibly be understood using models in which some agents are not fully rational. The field has two building blocks: limits to arbitrage, which argues that it can be difficult for rational traders to undo the dislocations caused by less rational traders; and psychology, which catalogues the kinds of deviations from full rationality we might expect to see. We discuss these two topics, and then present a number of behavioral finance applications: to the aggregate stock market, to the cross-section of average returns, to individual trading behavior, and to corporate finance. We close by assessing progress in the field and speculating about its future course.

Number of Pages in PDF File: 77

Keywords: behavioral finance, market efficiency, limits to arbitrage, psychology, investor behavior

JEL Classification: G11, G12, G30

working papers series





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Date posted: October 4, 2002  

Suggested Citation

Barberis, Nicholas and Thaler, Richard H., A Survey of Behavioral Finance (September 2002). Available at SSRN: http://ssrn.com/abstract=327880 or http://dx.doi.org/10.2139/ssrn.327880

Contact Information

Nicholas Barberis (Contact Author)
Yale School of Management ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-436-0777 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Richard H. Thaler
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-5208 (Phone)
773-702-0458 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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