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Persuasion in Finance

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Author Info
Sendhil Mullainathan
Andrei Shleifer

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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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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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Find related papers by JEL classification:
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
M3 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. James J. Choi & David Laibson & Brigitte C. Madrian, 2006. "Why Does the Law of One Price Fail? An Experiment on Index Mutual Funds," NBER Working Papers 12261, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Cronqvist, Henrik, 2006. "Advertising and Portfolio Choice," Working Paper Series 2006-16, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
  3. Sendhil Mullainathan & Joshua Schwartzstein & Andrei Shleifer, 2006. "Coarse Thinking and Persuasion," NBER Working Papers 12720, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. 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. [Downloadable!]
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