Behavioral finance: insights from experiments I: theory and financial markets

From Efficient Markets Theory to Behavioral Finance

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From Ef cient Markets Theory to Behavioral Finance

A cademic Ž nance has evolved a long way from the days when the efŽ cient markets theory was widely considered to be proved beyond doubt. Behavioral Ž nance—that is, Ž nance from a broader social science perspective including psychology and sociology—is now one of the most vital research programs, and it stands in sharp contradiction to much of efŽ cient markets theory. The efŽ cient markets th...

Agent-Based Modeling Bridges Theory of Behavioral Finance and Financial Markets

Financial Economics researches have become active since 1950’s and many prominent theories regarding asset pricing and corporate finance have been proposed (Markowitz, 1952; Modigliani, Miller, 1958; Sharpe, 1964; Shleifer, 2000). The assumption of the efficiency of financial markets plays an important role in the literature in traditional financial theory and many research have been conducted ...

Prices and Portfolio Choices in Financial Markets : Theory , Econometrics , Experiments

Many tests of asset-pricing models address only the pricing predictions, but these pricing predictions rest on portfolio choice predictions that seem obviously wrong. This paper suggests a new approach to asset pricing and portfolio choices based on unobserved heterogeneity. This approach yields the standard pricing conclusions of classical models but is consistent with very different portfolio...

New Insights into Behavioral Finance