Investor Psychology and Asset Pricing |
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Authors: | David Hirshleifer |
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Institution: | Fisher College of Business, The Ohio State University |
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Abstract: | The basic paradigm of asset pricing is in vibrant flux. The purely rational approach is being subsumed by a broader approach based upon the psychology of investors. In this approach, security expected returns are determined by both risk and misvaluation . This survey sketches a framework for understanding decision biases, evaluates the a priori arguments and the capital market evidence bearing on the importance of investor psychology for security prices, and reviews recent models. |
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