A Behavioral Approach to Asset Pricing

✍ Scribed by Hersh Shefrin

• Publisher: Academic Press
• Year: 2008
• Tongue: English
• Leaves: 604
• Series: Academic Press Advanced Finance
• Edition: 2
• Category: Library

✦ Synopsis

Behavioral finance is the study of how psychology affects financial decision making and financial markets. It is increasingly becoming the common way of understanding investor behavior and stock market activity. In this 2nd Edition Hersh Shefrin examines the reigning assumptions of asset pricing theory and reconstructs them to incorporate findings from behavioral finance. In other words, he takes the traditional tools in asset pricing and behavioralizes them. He constructs a solid, intact structure that challenges classic assumptions and at the same time provides a strong theory and efficient empirical tools. Building on the models developed by both traditional asset pricing theorists and behavioral asset pricing theorists, Shefrin's book takes the discussion to the next step. He provides a general behaviorally based intertemporal treatment of asset pricing theory that extends to the discussion of derivatives, fixed income securities, mean-variance efficient portfolios, and the market portfolio, based on all the latest research and theory. * The second edition continues the tradition of the first edition by being the one and only book to focus completely on how behavioral finance principles affect asset pricing, now with its theory deepened and enriched by a plethora of research since the first edition * A companion website contains a series of examples worked out as Excel spreadsheets so that readers can input their own data to test the results

✦ Table of Contents

Cover
......Page 1
Title
......Page 2
Copyright
......Page 3
Contents
......Page 6
Preface to Second Edition......Page 20
Preface to First Edition......Page 24
About the Author......Page 30
1 Introduction......Page 31
2 Representativeness and Bayes Rule: Psychological Perspective......Page 44
3 Representativeness and Bayes Rule: Economics Perspective......Page 53
4 A Simple Asset Pricing Model
Featuring Representativeness......Page 61
5 Heterogeneous Judgments in Experiments......Page 73
6 Representativeness and Heterogeneous Beliefs Among Individual Investors, Financial Executives, and Academics......Page 88
7 Representativeness and Heterogeneity in the Judgments of Professional Investors......Page 102
8 A Simple Asset Pricing Model with Heterogeneous Beliefs......Page 123
9 Heterogeneous Beliefs and Inefficient Markets......Page 134
10 A Simple Market Model of Prices and Trading Volume......Page 149
11 Efficiency and Entropy: Long-Run Dynamics......Page 167
12 CRRA and CARA Utility Functions......Page 185
13 Heterogeneous Risk Tolerance and Time Preference......Page 199
14 Representative Investors in a Heterogeneous CRRA Model......Page 208
15 Sentiment......Page 226
16 Behavioral SDF and the Sentiment Premium......Page 243
17 Behavioral Betas and Mean-Variance Portfolios......Page 261
18 Cross-Section of Return Expectations......Page 279
19 Testing for a Sentiment Premium......Page 305
20 A Behavioral Approach to the Term Structure of Interest Rates......Page 315
21 Behavioral Black–Scholes......Page 326
22 Irrational Exuberance and Option Smiles......Page 345
23 Empirical Evidence in Support of Behavioral SDF......Page 366
24 Prospect Theory: Introduction......Page 396
25 Prospect Theory Portfolios......Page 423
26 SP/A Theory: Introduction......Page 433
27 SP/A-Based Behavioral Portfolio Theory......Page 441
28 Equilibrium with Behavioral Preferences......Page 464
29 The Disposition Effect: Trading Behavior and Pricing......Page 489
30 Reflections on the Equity Premium Puzzle......Page 507
31 Continuous Time Behavioral Equilibrium Models......Page 525
32 Conclusion......Page 551
References......Page 563
Index......Page 587

✦ Subjects

Финансово-экономические дисциплины;Финансы;