On Rationality In Financial Markets
نویسنده
چکیده
To many a casual observer, nancial markets look chaotic. Prices often change erratically, and large, unpredictable price swings are not uncommon. Why is this? Does this re ect the irrational side of human behavior, as is often suggested? Is this the e ect of the invisible hand of the addicted gambler? Already in 1688, Jos e de la Vega described the Amsterdam Stock Exchange as a \confusi on de confusiones" (a bewilderment of confusions). Since then, many have subscribed to the view that nancial markets are irrational. This article explores the issues.
منابع مشابه
The rationality-allocational reasons for limiting the size of financial firms and taxing financial transactions
After the recent financial crisis, many types of government policies have been debated as possible remedies, but most of them are still controversial. This paper considers two: (A) limiting the growth of financial firms; (B) taxing financial transactions. It strengthens the arguments for both by means of the recently proposed rationality-allocation analysis, which broadens the view of financial...
متن کاملBuilding Financial Markets With Artificial Agents: Desired goals, and present techniques
Financial markets operate as a large interacting group of agents each in a constant struggle to better understand and interpret current prices and information. The complex interconnections between prices and information is probably more dramatic in financial markets than any other economic situation. Economic theory has been capable of describing many different financial equilibria, but it rema...
متن کاملAnimal spirits in financial economics: A review of deviations from economic rationality
a r t i c l e i n f o John Keynes made the notion of animal spirits a central part of economics in 1936. However, recent financial literature is dominated by asset pricing models based on strict economic rationality and struggles to accept the notion of animal spirits. This essay is an overview of the causes and consequences of financial market inefficiency and failure and the role of animal sp...
متن کاملActive and Passive Learning in Agent-based Financial Markets
This short note compares and contrasts two forms of learning which are present in most agent-based financial markets. First, passive learning refers to a form of “as if rationality” where wealth accumulates on strategies which have done relatively well. Second, active learning refers to the active switching of agents across strategies. Most heterogeneous agent markets contain some form of both ...
متن کاملBarber and Odean.fm
The field of modern financial economics assumes that people behave with extreme rationality, but they do not. Furthermore, people’s deviations from rationality are often systematic. Behavioral finance relaxes the traditional assumptions of financial economics by incorporating these observable, systematic, and very human departures from rationality into standard models of financial markets. We h...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
عنوان ژورنال:
دوره شماره
صفحات -
تاریخ انتشار 1998