Investor Psychology and Asset Pricing
Journal of Finance, Vol. 56, No. 4, pp. 1533-1598, August 2001
Posted: 1 Dec 2008
Date Written: 2001
The basic paradigm of asset pricing is in vibrant flux. The purely rational approach is being subsumed by a broader approach based upon the psychology of investors. In this approach, security expected returns are determined by both risk and misvaluation. This survey sketches a framework for understanding decision biases, evaluates the a priori arguments and the capital market evidence bearing on the importance of investor psychology for security prices, and reviews recent models.
Presentation Slides can be found here: https://ssrn.com/abstract=3181614.
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