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Human Behavior and the Efficiency of the Financial System

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  • Robert J. Shiller

Abstract

Recent literature in empirical finance is surveyed in its relation to underlying behavioral principles, principles which come primarily from psychology, sociology and anthropology. The behavioral principles discussed are: prospect theory, regret and cognitive dissonance mental compartments, overconfidence, over- and underreaction, representativeness heuristic disjunction effect, gambling behavior and speculation, perceived irrelevance of history thinking, quasi-magical thinking, attention anomalies, the availability heuristic contagion, and global culture.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6375.

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Date of creation: Jan 1998
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Publication status: published as Shiller, Robert J., 1999. "Human behavior and the efficiency of the financial system," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 20, pages 1305-1340 Elsevier.
Handle: RePEc:nbr:nberwo:6375

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