Behavioral Finance

New Document :

The happiness paradox: a formal explanation from psycho-economics

The first aim of the paper is to provide a formal explanation for the happiness paradox, i.e. the fact that well-being in the advanced countries does not increase over time, or even declines, in spite of the rising trend of income, while people continue to strive for money. By Prof. Maurizio Pugno

Abu Ghraib: Lessons from behavioural finance and for corporate governance

Bad apples or bad barrels? It is tempting to believe bad behaviour is the result of a few rotten individuals. However, the overwhelming psychological evidence suggests that if you put good people into bad situations they usually turn bad. Corporate malfeasance and the events in Iraqi prisons are examined and the lessons explored.

Archive :

Global Equity Strategy Part man, part monkey

Leaving the trees could have been our first mistake. Our minds are suited for solving problems related to our survival, rather than being optimised for investment decisions. We all make mistakes when we make decisions.

From Homo Economicus to Homo Sapiens

Responding to a request for a forecast is especially tricky for someone like me, who specializes in other people's biases. Research in psychology suggests that certain biases are very likely to creep into my forecasts about the future of economics (or anything else). Prof. Richard H. Thaler

The PD-Utility Function for Prospect Behavior

Based on Partial Distribution, we put forward a PD-utility function of prospect behavior for the first time, the profiting utility function and losing utility function. Prof. Feng Dai , Prof. Song-tao Wu, Prof. Ya-jun Zhuang

Biased Judgement on what moves Stock Prices

The paper describes how 40 Polish financial analysts associate various kinds of economic, political news and technical analysis signals with the future stock prices. By Prof. Piotr Zielonka

Overconfidence, Investor Sentiment, and Evolution

We focus our analysis on the survival of overconfidence and investor sentiment.We find that underconfidence or pessimism cannot survive, but moderate overconfidence or optimism can survive and even dominate, particularly when the fundamental risk is large. Prof. F. Albert Wang

A Behavioral Approach to learning in Economics

In economics, adjustment of behavior has traditionally been treated as a “black box.” Recent approaches that focus on learning behavior try to model, test, and simulate specific adjustment mechanisms in specific environments (mostly in games). Results often critically depend on distinctive assumptions, and are not easy to generalize. This paper proposes a different approach that aims to allow for more general conclusions in a methodologically more compatible way. Prof. Tilman Slembeck

On Kernels and Sentiment

The paper analyzes the manner in which sentiment affects the pricing kernel. Sentiment is another term for traders’ errors. The central question of the paper is: How can the concept of sentiment be formally defined so as to identify the manner in which traders’ errors are manifest in the pricing kernel? Prof. Hersh Shefrin