The results of an asset market experiment, in which 64 subjects trade two assets oneight markets in a computerized continuous double auction, indicate that objectivelyirrelevant information influences trading behavior. Moreover, positively and negativelyframed information leads to a particular...

Since the equity premium as well as the risk-free rate puzzle question the concepts centralto financial and economic modeling, we apply behavioral decision theory to asset pricing in view ofsolving these puzzles. U.S. stock market data for the period 1960-2003 and German stock marketdata for the...

This paper shows that preferences alone cannot explain the patterns reported in the literature.

(...) We provide support for the disposition effect. Participants who experience a gain sell their assets more rapidly than participants who experience a loss, and positively framed subjects generally sell their assets later than negatively framed subjects.

In this paper the authors measure the risk attitudes of bond investors which can be revealed from settled market prices. They present an equilibrium model which focuses on the stochastic behavior of tastes in addition to the dynamics of investor beliefs.

Markowitz and Sharpe won the Nobel Prize in Economics more than a decade ago for the development of Mean-Variance analysis and the Capital Asset Pricing Model (CAPM). In the year2002, Kahneman won the Nobel Prize in Economics for the development of Prospect Theory....

Investors' return expectations are pivotal in stock markets, but the reasoning behind these expectations remains a black box for economists. This paper sheds light on economic agents' mental models - their subjective understanding - of the stock market, drawing on surveys with the US general...

This paper proposes validation using simulation based indirect estimation. It uses typical characteristic moments of financial market data to assess the similarity of simulation outcomes.

This paper studies the ability of a general class of habit-based asset pricing models to match the conditional moment restrictions implied by asset pricing theory.

We examine overconfidence among equity mutual fund managers. While overconfidencehas been extensively documented among retail investors, evidence fromprofessional investors is scarce. Consistent with theories of overconfidence, we findthat fund managers trade more after good past performance....