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Human Behavior and the Efficiency of the Financial System

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  • Robert J. Shiller

Abstract

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.

Suggested Citation

  • Robert J. Shiller, 1998. "Human Behavior and the Efficiency of the Financial System," NBER Working Papers 6375, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:6375
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