Nonrational Actors and Financial Market Behavior

Richard Zeckhauser, Jayendu Patel and Darryll Hendricks

No 3731, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The insights of descriptive decision theorists and psychologists, we believe, have much to contribute to our understanding of financial market macrophenomena. We propose an analytic agenda that distinguishes those individual idiosyncrasies that prove consequential at the macro-level from those that are neutralized by market processes such as poaching. We discuss five behavioral traits - barn-door closing, expert/reliance effects, status quo bias, framing, and herding - that we employ in explaining financial flows. Patterns in flows to mutual funds, to new equities, across national boundaries, as well as movements in debt-equity ratios are shown to be consistent with deviations from rationality.

Date: 1991-06
Note: ME
References: Add references at CitEc
Citations: View citations in EconPapers (19)

Published as Theory and Decision, vol 31, 1991, pp 257-287

Downloads: (external link)
http://www.nber.org/papers/w3731.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:3731

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w3731

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().