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

See all articles by Joshua D. Coval

Joshua D. Coval

Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

David A. Hirshleifer

University of California, Irvine - Paul Merage School of Business; NBER

Siew Hong Teoh

University of California, Irvine - Accounting Area

Date Written: October 4, 2008

Abstract

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.

Suggested Citation

Coval, Joshua D. and Hirshleifer, David A. and Teoh, Siew Hong, Deception and Self-Deception in Capital Markets (October 4, 2008). DECEPTION IN MARKETS, Caroline Gerschlager, ed., pp. 131-169, Palgrave Macmillan/U.K, 2005 . Available at SSRN: https://ssrn.com/abstract=1278647

Joshua D. Coval

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

David A. Hirshleifer (Contact Author)

University of California, Irvine - Paul Merage School of Business ( email )

Irvine, CA California 92697-3125
United States

HOME PAGE: http://sites.uci.edu/dhirshle/

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Siew Hong Teoh

University of California, Irvine - Accounting Area ( email )

Irvine, CA 92697-3125
United States

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