Persuasion in Finance

41 Pages Posted: 7 Dec 2005

See all articles by Sendhil Mullainathan

Sendhil Mullainathan

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Andrei Shleifer

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2005

Abstract

Persuasion is a fundamental part of social activity, yet it is rarely studied by economists. We compare the traditional economic model, in which persuasion is communication of objectively valuable information, with a behavioral model, in which persuasion is an effort to fit the message into the audience's already held beliefs. We present a simple formalization of the behavioral model, and compare the two models using data on financial advertising in Money and Business Week magazines over the course of the internet bubble. The evidence on the content of the persuasive messages is broadly consistent with the behavioral model of persuasion.

Keywords: advertising, internet bubble, mutual funds

JEL Classification: G11, G14, M3

Suggested Citation

Mullainathan, Sendhil and Shleifer, Andrei, Persuasion in Finance (October 2005). Available at SSRN: https://ssrn.com/abstract=864686 or http://dx.doi.org/10.2139/ssrn.864686

Sendhil Mullainathan

Harvard University - Department of Economics ( email )

Littauer Center
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National Bureau of Economic Research (NBER) ( email )

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Andrei Shleifer (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
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617-496-1708 (Fax)

HOME PAGE: http://www.economics.harvard.edu/~ashleife/

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

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Belgium

HOME PAGE: http://www.ecgi.org

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