Behavioral Capital Asset Pricing Theory
This paper develops a capital asset pricing theory in a market where noise traders interact with information traders. Noise traders are traders who commit cognitive errors while information traders are free of cognitive errors. The theory includes the determination of the mean-variance efficient frontier, the return on the market portfolio, the term structure, and option prices. The paper derives a necessary and sufficient condition for the existence of price efficiency in the presence of noise traders and analyzes the effects of noise traders on price efficiency, volatility, return anomalies, volume, and noise trader survival.
Year of publication: |
1994
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Authors: | Shefrin, Hersh ; Statman, Meir |
Published in: |
Journal of Financial and Quantitative Analysis. - Cambridge University Press. - Vol. 29.1994, 03, p. 323-349
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Publisher: |
Cambridge University Press |
Description of contents: | Abstract [journals.cambridge.org] |
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