Human Behavior and the Efficiency of the Financial System

Robert J. Shiller ()

No 1172, Cowles Foundation Discussion Papers from Cowles Foundation, Yale University

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.

Date: 1998-02
Note: CFP 1025.
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Published in J.B. Taylor and M. Woodford, eds., Handbook of Macroeconomics, Vol. 1C, Part 6, 1999, pp. 1306-1340

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Working Paper: Human Behavior and the Efficiency of the Financial System (1998)
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