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Inefficient Markets: An Introduction to Behavioral Finance
Author(s): Andrei Shleifer (Author)
- Publisher: Oxford University Press
- Publication Date: April 20, 2000
- Edition: 1st
- Language: English
- Print length: 224 pages
- ISBN-10: 0198292279
- ISBN-13: 9780198292272
Book Description
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 models of such markets. These models explain the available financial data more accurately than the efficient markets hypothesis, and generate new predictions about security prices. 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.
Editorial Reviews
Review
“An excellent academic discussion of [stock mispricing] and other behavioral influences in the stock market.”–Jeff Madrick, New York Review of Books
“The only advanced undergraduate or graduate text available on the subject.”–Jeffrey Wurgler, Yale School of Management
About the Author
Andrei Shleifer is professor of Economics at Harvard University.
