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Inefficient Markets : An Introduction to Behavioural Finance - Andrei Shleifer

Inefficient Markets

An Introduction to Behavioural Finance

Hardcover

Published: 1st June 2000
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The efficient markets hypothesis has been the central proposition in finance for nearly thirty years. It states that securities prices in financial markets must equal fundamental values, either because all investors are rational or because arbitrage eliminates pricing anomalies. This book describes an alternative approach to the study of financial markets: behavioral finance. This approach starts with an observation that the assumptions of investor rationality and perfect arbitrage are overwhelmingly contradicted by both psychological and institutional evidence. In actual financial markets, less than fully rational investors trade against arbitrageurs whose resources are limited by risk aversion, short horizons, and agency problems. The book presents and empirically evaluates models of such inefficient markets. Behavioral finance models both explain the available financial data better than does the efficient markets hypothesis and generate new empirical predictions. These models can account for such anomalies as the superior performance of value stocks, the closed end fund puzzle, the high returns on stocks included in market indices, the persistence of stock price bubbles, and even the collapse of several well-known hedge funds in 1998. By summarizing and expanding the research in behavioral finance, the book builds a new theoretical and empirical foundation for the economic analysis of real-world markets.

One of the very first books on behavioural finance ... covers some of the most important ideas in behavioural finance ... a rich source of empirical facts and new ideas, waiting to be further explored in financial economics ... Every financial economist, in particular those being trained in the classical finance school, should read this high-level book on behavioural finance. It is full of provocative and inspiring ideas that will keep your mind busy for many hours. I am sure this excellent book will become a classic in behavioural finance. Journal of Institutional and Theoretical Economics

Are Financial Markets Efficient? Noise Trader Risk in Financial Markets The Closed-End Fund Puzzle Professional Arbitrage A Model of Investor Sentiment Positive Feedback Investment Strategies Open Problems

ISBN: 9780198292289
ISBN-10: 0198292287
Series: Clarendon Lectures in Economics
Audience: Professional
Format: Hardcover
Language: English
Number Of Pages: 224
Published: 1st June 2000
Publisher: Oxford University Press
Country of Publication: GB
Dimensions (cm): 22.4 x 14.5  x 1.7
Weight (kg): 0.37