Abstract

http://ssrn.com/abstract=868642
 
 

Citations (2)



 
 

Footnotes (150)



 


 



Regulatory Responses to Investor Irrationality: The Case of the Research Analyst


Jill E. Fisch


Institute for Law and Economics, University of Pennsylvania Law School


Lewis & Clark Law Review, Vol. 10, pp. 57, 2006
Fordham Law Legal Studies Research Paper No. 100

Abstract:     
An extensive body of behavioral economics literature suggests that investors do not behave with perfect rationality. Instead, investors are subject to a variety of biases that may cause them to react inappropriately to information. The policy challenge posed by this observation is to identify the appropriate response to investor irrationality. In particular, should regulators attempt to protect investors from bad investment decisions that may be the result of irrational behavior?

This article considers the appropriate regulatory response to investor irrationality within the concrete context of the research analyst. Many commentators have argued that analyst conflicts of interest led to biases reports and recommendations that distorted analyst behavior. In the wake of the analyst scandals, regulators have responded - most recently by mandating increased independence. This response can be understood as an effort to make investor reliance reasonable.

The article questions this mission. In particular, the article challenges the role of regulators in identifying appropriate sources of investment information or determining when investor behavior is rational. This fallibility of regulatory oversight coupled with the costs of regulation suggest that regulators should exercise caution, particularly in light of the market's capacity to discipline investor decisions.

Number of Pages in PDF File: 27

Keywords: behavioral economics, investor rationality, research analysts

Accepted Paper Series


Download This Paper

Date posted: December 9, 2005 ; Last revised: June 22, 2009

Suggested Citation

Fisch, Jill E., Regulatory Responses to Investor Irrationality: The Case of the Research Analyst. Lewis & Clark Law Review, Vol. 10, pp. 57, 2006; Fordham Law Legal Studies Research Paper No. 100. Available at SSRN: http://ssrn.com/abstract=868642

Contact Information

Jill E. Fisch (Contact Author)
Institute for Law and Economics, University of Pennsylvania Law School ( email )
3501 Sansom Street
Philadelphia, PA 19104
United States
215-746-3454 (Phone)
215-573-2025 (Fax)
Feedback to SSRN


Paper statistics
Abstract Views: 1,338
Downloads: 258
Download Rank: 66,541
Citations:  2
Footnotes:  150

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.250 seconds