Dollars and Jens
Sunday, October 21, 2007
Behavioral Finance
Over the last year or so, I've been reading about behavioral finance from a lot of angles. Some of my reading I regret as a waste of time, but at least I can tell you what to read if you're interested.

If you're mathematically inclined, I highly recommend Andrei Shleifer's compilation of his research in the form of the book "Inefficient Markets". This book has very little to do with psychology, but it introduces some models which don't assume rationality, or which even assume irrationality on the part of some investors.

In the introduction to Shleifer's book, he disclaims any characterization of that book as a "survey", and rightly so; it's just his research, and it's more abstract and less psychological than a survey would be. If you do want a survey of behavioral finance, though, the paper you're looking for was written by Yale's Nick Barberis and UChicago's Richard Thaler, and can be downloaded from Barberis's website. In PDF form: "A survey of behavioral finance". It's about 70 pages, which isn't short for a paper, but, really, it's all you need to read.

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