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Human Behavior and the Efficiency of the Financial System

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Abstract
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, over- and under-reaction, representativeness heuristic, the disjunction effect, gambling behavior and speculation, perceived irrelevance of history, magical thinking, quasi-magical thinking, attention anomalies, the availability heuristic, culture and social contagion, and global culture.

Suggested Citation

  • Robert J. Shiller, 1998. "Human Behavior and the Efficiency of the Financial System," Cowles Foundation Discussion Papers 1172, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:1172
    Note: CFP 1025.
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