Investor Psychology and Asset Pricing

Hirshleifer, David (2001): Investor Psychology and Asset Pricing. Published in: Journal of Finance , Vol. 56, No. 4 (August 2001): pp. 1533-1597.

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.

• Item Type: MPRA Paper
• Institution: Fisher College of Business, The Ohio State University
• Language: English
• Keywords: investor psychology; asset pricing; behavioral finance; behavioral economics; anomalies; misvaluation; risk; decision biases; emotions; decision bias; arbitrage; capital markets
• Subjects: G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G1 - General Financial Markets; G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading

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