Behavioral finance: the role of psychology in financial markets (Dutch title: Gedragseconomie: de rol van psychologie op financiële markten)
Abstract(paper is in Dutch) This study surveys the behavioural finance literature. It discusses both the literature that incorporates behavioural considerations into rational models, and the literature that concentrates on the role of prospect theory and the effect of cognitive-psychological mechanisms on the behaviour of financial market participants. The study concentrates on the latter. The implications of cognitive psychology on financial market behaviour are described. Also, the potential consequences of the application of behavioural finance concepts for financial market (in)efficiency are discussed.
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Bibliographic InfoPaper provided by Netherlands Central Bank, Directorate Supervision in its series Research Series Supervision (discontinued) with number 62.
Date of creation: Aug 2003
Date of revision:
Behavioural finance; cognitive psychology; prospect theory;
Find related papers by JEL classification:
- G1 - Financial Economics - - General Financial Markets
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-08-31 (All new papers)
- NEP-CFN-2003-08-31 (Corporate Finance)
- NEP-FIN-2003-08-31 (Finance)
- NEP-FMK-2003-08-31 (Financial Markets)
- NEP-HPE-2003-08-31 (History & Philosophy of Economics)
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