Bubbles, Human Judgment, and Expert Opinion

17 Pages Posted: 16 Jul 2001

See all articles by Robert J. Shiller

Robert J. Shiller

Yale University - Cowles Foundation; National Bureau of Economic Research (NBER); Yale University - International Center for Finance

Date Written: May 2001


Research in psychology and behavioral finance is surveyed for evidence to what extent experts such as professional investment managers or endowment trustees may behave in such a way as to help perpetuate speculative bubbles in financial markets. This paper discusses scholarly psychological literature on the representativeness heuristic, overconfidence, attentional anomalies, self-esteem, conformity pressures, salience and justification for insights into weaknesses in expert opinion. The role of the prudent person standard and the news media in influencing experts is considered. The relevance of the literature on testing of the efficient markets theory is discussed.

Keywords: Institutional Investors, Investment Professionals, Organizations, Committees, Stock Market, Speculative Markets, Behavioral Finance, Feedback, Groupthink, Representativeness, Heuristic, Conservatism, Subjective Probability, Prudent Person Standard, Erisa, News Media, Attention, Efficient Markets, Conformity Pressures, True Uncertainty

JEL Classification: G10

Suggested Citation

Shiller, Robert J., Bubbles, Human Judgment, and Expert Opinion (May 2001). Available at SSRN: https://ssrn.com/abstract=275515

Robert J. Shiller (Contact Author)

Yale University - Cowles Foundation ( email )

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HOME PAGE: http://www.econ.yale.edu/~shiller/

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