Investor Psychology and Asset Pricing
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- 1 August 2001
- journal article
- research article
- Published by Wiley in The Journal of Finance
- Vol. 56 (4) , 1533-1597
- https://doi.org/10.1111/0022-1082.00379
Abstract
The basic paradigm of asset pricing is in vibrant flux. The purely rational approach is being subsumed by a broader approach based upon the psychology of investors. In this approach, security expected returns are determined by both risk and misvaluation. This survey sketches a framework for understanding decision biases, evaluates the a priori arguments and the capital market evidence bearing on the importance of investor psychology for security prices, and reviews recent models.Keywords
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