CRITIQUE OF UTILITY THEORY, THE ASSUMPTION OF RATIONALITY AND THE EFFICIENT MARKETS HYPOTHESIS

Itzhak Venezia

Chapter 3 in Lecture Notes in Behavioral Finance, 2018, pp 39-58 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The following sections are included:Early Examples of Rationality Violations:Allais ParadoxEllsberg’s ParadoxCritique of the Early ParadoxesThe “new wave” Evidence (late 1970s early 1980s) in Finance and Psychology Leading to Behavioral Finance:Excess volatilitySiamese Twin Shares Royal Dutch/Shell TransportIndex inclusionKahneman and Tversky’s Examples of Cognitive Biases — I:RepresentativenessConservatism

Keywords: Behavioral Finance; Rationality; Prospect Theory; Cognitive and Psychological; Efficient Markets; Market Anomalies; Limits to Arbitrage; Heuristics (search for similar items in EconPapers)
Date: 2018
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