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Persuasion in Finance

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  • Sendhil Mullainathan
  • Andrei Shleifer

Abstract

Persuasion is a fundamental part of social activity, yet it is rarely studied by economists. We compare the traditional economic model, in which persuasion is communication of objectively valuable information, with a behavioral model, in which persuasion is an effort to fit the message into the audience's already held beliefs. We present a simple formalization of the behavioral model, and compare the two models using data on financial advertising in Money and Business Week magazines over the course of the internet bubble. The evidence on the content of the persuasive messages is broadly consistent with the behavioral model of persuasion.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11838.

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Date of creation: Dec 2005
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Handle: RePEc:nbr:nberwo:11838

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Citations

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Cited by:
  1. Hirshleifer, David & Teoh, Siew Hong, 2008. "Thought and Behavior Contagion in Capital Markets," MPRA Paper 9142, University Library of Munich, Germany.
  2. James J. Choi & David Laibson & Brigitte C. Madrian, 2010. "Why Does the Law of One Price Fail? An Experiment on Index Mutual Funds," Review of Financial Studies, Society for Financial Studies, vol. 23(4), pages 1405-1432, April.
  3. Sendhil Mullainathan & Joshua Schwartzstein & Andrei Shleifer, 2008. "Coarse Thinking and Persuasion," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 577-619, 05.
  4. Gersbach, Hans & Hahn, Volker, 2008. "Monetary Policy Inclinations," CEPR Discussion Papers 6761, C.E.P.R. Discussion Papers.
  5. Gerry Antioch, 2013. "Persuasion is now 30 per cent of US GDP," Economic Roundup, Treasury, Australian Government, issue 1, pages 1-10, April.
  6. Arjo Klamer, 2011. "Cultural entrepreneurship," The Review of Austrian Economics, Springer, vol. 24(2), pages 141-156, June.
  7. Olsen, Robert A., 2008. "Trust as risk and the foundation of investment value," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(6), pages 2189-2200, December.
  8. Sumit Agarwal & Brent W. Ambrose, 2008. "Does it pay to read your junk mail? evidence of the effect of advertising on home equity credit choices," Working Paper Series WP-08-09, Federal Reserve Bank of Chicago.
  9. Cronqvist, Henrik, 2006. "Advertising and Portfolio Choice," Working Paper Series 2006-16, Ohio State University, Charles A. Dice Center for Research in Financial Economics.

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