Finance and the Behavioral Prospect: Risk, Exuberance, and Abnormal Markets (Quantitative Perspectives on Behavioral Economics and Finance) - Hardcover

Book 2 of 5: Quantitative Perspectives on Behavioral Economics and Finance

Chen, James Ming

 
9783319327105: Finance and the Behavioral Prospect: Risk, Exuberance, and Abnormal Markets (Quantitative Perspectives on Behavioral Economics and Finance)
Hardcover
ISBN 10: 3319327100 ISBN 13: 9783319327105
Publisher: Palgrave Macmillan, 2016

Synopsis

This book explains how investor behavior, from mental accounting to the combustible interplay of hope and fear, affects financial economics. The transformation of portfolio theory begins with the identification of anomalies. Gaps in perception and behavioral departures from rationality spur momentum, irrational exuberance, and speculative bubbles. Behavioral accounting undermines the rational premises of mathematical finance. Assets and portfolios are imbued with “affect.” Positive and negative emotions warp investment decisions. Whether hedging against intertemporal changes in their ability to bear risk or climbing a psychological hierarchy of needs, investors arrange their portfolios and financial affairs according to emotions and perceptions. Risk aversion and life-cycle theories of consumption provide possible solutions to the equity premium puzzle, an iconic financial mystery. Prospect theory has questioned the cogency of the efficient capital markets hypothesis. Behavioral portfolio theory arises from a psychological account of security, potential, and aspiration.

"synopsis" may belong to another edition of this title.

About the Author

James Ming Chen holds the Justin Smith Morrill Chair in Law at Michigan State University, USA. He teaches, lectures, and writes widely on law, economics, and regulation. His books, Disaster Law and Policy and Postmodern Portfolio Theory, cover a broad range of issues concerning extreme events and risk management, from natural to financial disasters. He is of counsel to the Technology Law Group of Washington, D.C.; a public member of the Administrative Conference of the United States; and an elected member of the American Law Institute. A magna cum laude graduate of Harvard Law School and a former editor of the Harvard Law Review, Chen also served as a clerk to Justice Clarence Thomas of the Supreme Court of the United States.

From the Back Cover

This book explains how investor behavior, from mental accounting to the combustible interplay of hope and fear, affects financial economics. The transformation of portfolio theory begins with the identification of anomalies. Gaps in perception and behavioral departures from rationality spur momentum, irrational exuberance, and speculative bubbles. Behavioral accounting undermines the rational premises of mathematical finance. Assets and portfolios are imbued with “affect.” Positive and negative emotions warp investment decisions. Whether hedging against intertemporal changes in their ability to bear risk or climbing a psychological hierarchy of needs, investors arrange their portfolios and financial affairs according to emotions and perceptions. Risk aversion and life-cycle theories of consumption provide possible solutions to the equity premium puzzle, an iconic financial mystery. Prospect theory has questioned the cogency of the efficient capital markets hypothesis. Behavioral portfolio theory arises from a psychological account of security, potential, and aspiration.

"About this title" may belong to another edition of this title.

Publisher
Palgrave Macmillan
Publication date
2016
Language
English
ISBN 10 
3319327100
ISBN 13 
9783319327105
Binding
Hardcover
Edition number
1
Number of pages
355

Other Popular Editions of the Same Title

9783319813516: Finance and the Behavioral Prospect: Risk, Exuberance, and Abnormal Markets (Quantitative Perspectives on Behavioral Economics and Finance)

Featured Edition

ISBN 10:  331981351X ISBN 13:  9783319813516
Publisher: Palgrave Macmillan, 2018
Softcover