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Behavioral finance is a new approach in finance literature. The main idea is that investors are not as rational as they are assumed to be. Therefore, financial markets could be better understood by using models that capture the effects of both rational and irrational investors. The critics of behavioral finance could be grouped into two main categories: limits of arbitrage and psychological fac...

This study aims to test the adaptive market hypothesis by using myopic behavior of investors as a new proxy. The data have been taken from New York Stock Exchange December 1994 2020. Following this collection data, companies’ stock prices were distributed into six different portfolios based on size, investment, book-to-market value, and operating profit. Ordinal logistic regression was used cal...

Recent literature in empirical finance is surveyed in its relation to underlying behavioral principles, principles which come primarily from psychology, sociology and anthropology. The behavioral principles discussed are: prospect theory, regret and cognitive dissonance, anchoring, mental compartments, overconfidence, overand underreaction, representativeness heuristic, the disjunction effect, ...

n 1985, Werner De Bondt and I published an article that asked the question: “Does the stock market overreact?” The article was controversial because it gave evidence to support the hypothesis that a cognitive bias (investor overreaction to a long series of bad news) could produce predictable mispricing of stocks traded on the NYSE. Although this idea was hardly shocking to practitioners, the co...