NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Human Behavior and the Efficiency of the Financial System

Robert J. Shiller

NBER Working Paper No. 6375*
Issued in January 1998
NBER Program(s):   AP

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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