Behavioral Finance

A definitive guide to the growing field of behavioral finance This reliable resource provides a comprehensive view of behavioral finance and its psychological foundations, as well as its applications to finance. Comprising contributed chapters written by distinguished authors from some of the most influential firms and universities in the world, Behavioral Finance provides a synthesis of the most essential elements of this discipline, including psychological concepts and behavioral biases, the behavioral aspects of asset pricing, asset allocation, and market prices, as well as investor behavior, corporate managerial behavior, and social influences. Uses a structured approach to put behavioral finance in perspective Relies on recent research findings to provide guidance through the maze of theories and concepts Discusses the impact of sub-optimal financial decisions on the efficiency of capital markets, personal wealth, and the performance of corporations Behavioral finance has quickly become part of mainstream finance. If you need to gain a better understanding of this topic, look no further than this book.

A definitive guide to the growing field of behavioralfinanceThis reliable resource provides a comprehensive view ofbehavioral finance and its psychological foundations, as well asits applications to finance. Comprising contributed chapterswritten by distinguished authors from some of the most influentialfirms and universities in the world, Behavioral Financeprovides a synthesis of the most essential elements of thisdiscipline, including psychological concepts and behavioral biasesthe behavioral aspects of asset pricing, asset allocation, andmarket prices, as well as investor behavior, corporate managerialbehavior, and social influences.* Uses a structured approach to put behavioral finance inperspective* Relies on recent research findings to provide guidance throughthe maze of theories and concepts* Discusses the impact of sub-optimal financial decisions on theefficiency of capital markets, personal wealth, and the performanceof corporationsBehavioral finance has quickly become part of mainstreamfinance. If you need to gain a better understanding of this topiclook no further than this book.

Acknowledgments ixPart I Foundation and Key Concepts 11 Behavioral Finance: An Overview 3H. Kent Baker, John R. Nofsinger2 Traditional versus Behavioral Finance 23Robert Bloomfield3 Behavioral Finance: Application and Pedagogy in Business Education and Training 39Rassoul Yazdipour, James A. Howard4 Heuristics or Rules of Thumb 57Hugh Schwartz5 Neuroeconomics and Neurofinance 73Richard L. Peterson6 Emotional Finance: The Role of the Unconscious in Financial Decisions 95Richard J. Taffler, David A. Tuckett7 Experimental Finance 113Robert Bloomfield, Alyssa Anderson8 The Psychology of Risk 131Victor Ricciardi9 Psychological Influences on Financial Regulation and Policy 151David Hirshleifer, Siew Hong TeohPart II Psychological Concepts and Behavioral Biases 16910 Disposition Effect 171Markku Kaustia11 Prospect Theory and Behavioral Finance 191Morris Altman12 Cumulative Prospect Theory: Tests Using the Stochastic Dominance Approach 211Haim Levy13 Overconfidence 241Markus Glaser, Martin Weber14 The Representativeness Heuristic 259Richard J. Taffler15 Familiarity Bias 277Hisham Foad16 Limited Attention 295Sonya S. Lim, Siew Hong Teoh17 Other Behavioral Biases 313Michael Dowling, Brian LuceyPart III Behavioral Aspects of Asset Pricing 33118 Market Inefficiency 333Raghavendra Rau19 Belief- and Preference-Based Models 351Adam SzyszkaPart IV Behavioral Corporate Finance 37320 Enterprise Decision Making as Explained in Interview-Based Studies 375Hugh Schwartz21 Financing Decisions 393Jasmin Gider, Dirk Hackbarth22 Capital Budgeting and Other Investment Decisions 413Simon Gervais23 Dividend Policy Decisions 435Itzhak Ben-David24 Loyalty, Agency Conflicts, and Corporate Governance 453Randall Morck25 Initial Public Offerings 475François Derrien26 Mergers and Acquisitions 491Ming DongPart V Investor Behavior 51127 Trust Behavior: The Essential Foundation of Financial Markets 513Lynn A. Stout28 Individual Investor Trading 523Ning Zhu29 Individual Investor Portfolios 539Valery Polkovnichenko30 Cognitive Abilities and Financial Decisions 559George M. Korniotis, Alok Kumar31 Pension Participant Behavior 577Julie Richardson Agnew32 Institutional Investors 595Tarun Ramadorai33 Derivative Markets 613Peter LockePart VI Social Influences 62934 The Role of Culture in Finance 631Rohan Williamson35 Social Interactions and Investing 647Mark S. Seasholes36 Mood 671Tyler ShumwayPart VII Answers to Chapter Discussion Questions 681Index 727