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The Misinformation Effect In Financial Markets – An Emerging Issue In Behavioural Finance

Author

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  • Mateusz Polak

    (Instytut Psychologii Uniwersytetu Jagielloñskiego)

Abstract

The following paper is a theoretical introduction of the misinformation effect to behavioural finance. The misinformation effect causes a memory report regarding an event or particular knowledge to become contaminated with misleading information from another source. The paper aims to describe possible impact of the aforementioned phenomenon on the interpretation of stock market data, as well as the consequences of misinformation on investment-related decisions and the effective market hypothesis.

Suggested Citation

  • Mateusz Polak, 2012. "The Misinformation Effect In Financial Markets – An Emerging Issue In Behavioural Finance," "e-Finanse", University of Information Technology and Management, Institute of Financial Research and Analysis, vol. 8(3), pages 55-61, October.
    • Handle: RePEc:rze:efinan:v:8:y:2012:i:3:p:55-61
    as

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    File URL: http://www.e-finanse.com/artykuly_eng/227.pdf
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    References listed on IDEAS

    as
    1. Sheila C. Dow, 2011. "Cognition, market sentiment and financial instability," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 35(2), pages 233-249.
    2. Barberis, Nicholas & Shleifer, Andrei & Vishny, Robert, 1998. "A model of investor sentiment," Journal of Financial Economics, Elsevier, vol. 49(3), pages 307-343, September.
    3. De Bondt, Werner F M & Thaler, Richard, 1985. "Does the Stock Market Overreact?," Journal of Finance, American Finance Association, vol. 40(3), pages 793-805, July.
    4. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    behavioural finance; stock market psychology; misinformation effect;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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