A Behavioral Approach to Asset Pricing

Front Cover
Elsevier, Feb 3, 2005 - Business & Economics - 496 pages
0 Reviews
A Behavioral Approach to Asset Pricing Theory examines the reigning assumptions of asset pricing theory and reconstructs them to incorporate findings from behavioral finance. It 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, this book takes the discussion to the next step. The author 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.

The book develops a series of examples to illustrate the theoretical results. The CD-ROM contains most of the examples, worked out as Excel spreadsheets, so that a diligent reader can follow them through.
Instructors might also want to use the examples to assign class exercises, asking students to modify the numbers and see what happens.

* The first book to focus completely on how behavioral finance principles affect asset pricing
* Hersh Shefrin is a recognized expert in behavioral finance
* Behavioral finance is a growth area in finance scholarship and moving more and more into practice

What people are saying - Write a review

We haven't found any reviews in the usual places.


1 Introduction
Experimental Evidence
Investor Expectations
Part III Developing Behavioral Asset Pricing Models
Part IV Heterogeneity in Risk Tolerance and Time Discounting
Part V Sentiment and Behavioral SDF
Part VI Applications of Behavioral SDF
Part VII Prospect Theory
Part VIII Closure

Other editions - View all

Common terms and phrases

Popular passages

Page 17 - Tom W. is of high intelligence, although lacking in true creativity. He has a need for order and clarity, and for neat and tidy systems in which every detail finds its appropriate place. His writing is rather dull and mechanical, occasionally enlivened by somewhat corny puns and by flashes of imagination of the sci-fi type. He has a strong drive for competence. He seems to have little feel and little sympathy for other people and does not enjoy interacting with others. Self-centered, he nonetheless...
Page 16 - A person who follows this heuristic evaluates the probability of an uncertain event, or a sample, by the degree to which it is: (i) similar in essential properties to its parent population; and (ii) reflects the salient features of the process by which it is generated.
Page 17 - The preceding personality sketch of Tom W. was written during Tom's senior year in high school by a psychologist on the basis of personality tests. Tom W. is currently a graduate student. Please rank the following nine fields of graduate specialization in order of the likelihood that Tom W. is now a graduate student in each of these fields. Write "1" next to the most probable choice, etc.
Page 457 - An empirical investigation of continuous-time equity return models". Journal of Finance 57, 1239-1284. Andersen, TG, Bollerslev, T. (1998a). "Answering the skeptics: Yes, standard volatility models do provide accurate forecasts".

References to this book

All Book Search results »

About the author (2005)

Hersh Shefrin holds the Mario L. Belotti Chair in the Department of Finance at Santa Clara University's Leavey School of Business. He is a pioneer of behavioral finance, and has worked on behavioral issues for over thirty years. A Behavioral Approach to Asset Pricing is the first behavioral treatment of the pricing kernel. His book Behavioral Corporate Finance is the first textbook dedicated to the application of behavioral concepts to corporate finance. His book Beyond Greed and Fear was the first comprehensive treatment of the field of behavioral finance. A 2003 article appearing in The American Economic Review included him among the top fifteen theorists to have influenced empirical work in microeonomics. One of his articles is among the all time top ten papers to be downloaded from SSRN. He holds a Ph.D. from the London School of Economics, and an honorary doctorate from the University of Oulu in Finland.

Bibliographic information