NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

A Survey of Behavioral Finance

Nicholas Barberis, Richard Thaler

NBER Working Paper No. 9222
Issued in September 2002
NBER Program(s):   AP   CF

Behavioral finance argues that some financial phenomena can plausibly be understood using models in which some agents are not fully rational. The field has two building blocks: limits to arbitrage, which argues that it can be difficult for rational traders to undo the dislocations caused by less rational traders; and psychology, which catalogues the kinds of deviations from full rationality we might expect to see. We discuss these two topics, and then present a number of behavioral finance applications: to the aggregate stock market, to the cross-section of average returns, to individual trading behavior, and to corporate finance. We close by assessing progress in the field and speculating about its future course.

download in pdf format
   (787 K)

email paper

This paper is available as PDF (787 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w9222

Published: Barberis, Nicholas & Thaler, Richard, 2003. "A survey of behavioral finance," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 18, pages 1053-1128 Elsevier.

Users who downloaded this paper also downloaded these:
Baker and Wurgler w17333 Behavioral Corporate Finance: An Updated Survey
Morck w10644 Behavioral Finance in Corporate Governance - Independent Directors, Non-Executive Chairs, and the Importance of the Devil’s Advocate
Barberis, Huang, and Thaler w9997 Individual Preferences, Monetary Gambles and the Equity Premium
Baker, Ruback, and Wurgler w10863 Behavioral Corporate Finance: A Survey
Hong and Stein w6324 A Unified Theory of Underreaction, Momentum Trading and Overreaction in Asset Markets
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us