Deception and Self-Deception in Capital Markets
DECEPTION IN MARKETS, Caroline Gerschlager, ed., pp. 131-169, Palgrave Macmillan/U.K, 2005
Posted: 5 Oct 2008 Last revised: 29 Sep 2009
Date Written: October 4, 2008
We argue that self-deception underlies various aspects of the behavior of investors and of prices in capital markets. We examine the implications of self-deception for investor overconfidence, and how firms and financial institutions can exploit the overconfidence of investors in a predatory fashion. These ideas link self-deception to deception by others. We also examine how investor self-deception and overconfidence can affect financial reporting and disclosure policy.
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