Investor Psychology and Asset Pricing

92 Pages Posted: 28 Mar 2001

See all articles by David A. Hirshleifer

David A. Hirshleifer

Marshall School of Business, USC; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: February 26, 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.

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Suggested Citation

Hirshleifer, David A., Investor Psychology and Asset Pricing (February 26, 2001). AFA 2001 New Orleans Meetings, Available at SSRN: or

David A. Hirshleifer (Contact Author)

Marshall School of Business, USC ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

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National Bureau of Economic Research (NBER) ( email )

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