Bubbles, Human Judgment, and Expert Opinion
AbstractResearch in psychology and behavioral finance is surveyed for evidence to what extent experts such as professional investment managers or endowment trustees may behave in such a way as to help perpetuate speculative bubbles in financial markets. This paper discusses scholarly psychological literature on the representativeness heuristic, overconfidence, attentional anomalies, self-esteem, conformity pressures, salience and justification for insights into weaknesses in expert opinion. The role of the prudent person standard and the news media in influencing experts is considered. The relevance of the literature on testing of the efficient markets theory is discussed.
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Bibliographic InfoPaper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1303.
Length: 17 pages
Date of creation: May 2001
Date of revision:
Publication status: Published in Financial Analysts Journal (May/June 2002), 58(3): 18–26; and in The ICFAI Journal of Behavioral Finance (India) (September 2004), 1(3): 7–17
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Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-11-27 (All new papers)
- NEP-ENT-2001-11-27 (Entrepreneurship)
- NEP-FMK-2001-11-27 (Financial Markets)
- NEP-NET-2001-11-27 (Network Economics)
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