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Basic Reading

• Waerneryd, K-E (2000). The psychology of private investing. chapters 1 (on efficient markets) and 2 (on behavioural considerations). In  Box
• Eachus (1988). The Psychologist, 1(3), 100-103.
• De Bondt, W.F. (1998). A portrait of the individual investor. European Economic Review, 42, 831-844.  P330.5E900
• Statman, M. (1999). Behavioral finance: past battles and future engagements. Financial Analysts Journal, 55(6), 18-27

 

Additional material

1. Overconfidence and other biases

• The Behavioral Finance  Research Library has a lot of useful material. Have a look at Odean's papers on 'boys will be boys' and 'learning to be overconfident' and Hirshleifer's paper on investor overconfidence
• Stephan E. & Kiell, G (2000). Decision processes in professional investors: does expertise moderate judgemental biases. IAREP/SABE Proceeding, pp 416-420
• Barberis, R. et al (1998). A model of investor sentiment. Journal of Financial Economics, 49, 307-342
• Borges, B. et al (1999). Can ignorance beat the stock market? In G. Gigerenzer and P. Todd (Eds). Simple heuristics that make us smart.  153.43 GIG
• Odean, T (1999). Do investors trade too much? American Economic Review, 89, 1279-98

2.  'Herd' behaviour, rumour, crashes and bubbles

• Porter D. & Smith V.L. (1995). Futures contracting and dividend uncertainty in experimental asset markets. Journal of Business, 68, 509-541
• DiFonzo, N. & Bordia, P. (1997). Rumor and prediction: making sense (but losing dollars) in the stock market. Organizational Behavior and Human decision processes, 71, 329-353
• Shiller, R.J. (1995). Conversation, information and herd behavior. American Economic Review, 85, 181-185
• De Bondt W.F.M. &  Forbes,W.P. (1999). Herding in analyst earnings forecasts: evidence from the United Kingdom. European Financial Management 5(2), 141-163
• Welch I (2000). Herding among security analysts. Journal of Financial Economics, 58, 369-396
• Shiller RJ (1987). Investor Behavior in the October 1987 stock market crash: survey evidence PW

 

3. Ethical investment

• Lewis, Mackenzie, Webley & Winnett (1998), Morals and markets: The case of ethical investing. In Taylor-Gooby, (Ed) Choice and Public Policy 361.60842
• Lewis A, & Mackenzie C (2000). Morals, money, ethical investing and economic psychology. Human Relations, 53, 179-191  OR
• Lewis, A, & Mackenzie C.R. (2000). Support for investor activism among UK ethical investors. Journal of Busines Ethics, 24, 215-222. In. Box
• Webley, P., Lewis, A & Mackenzie, C (2001). 'Loyalty in Ethical investment: an experimental approach'  paper in press .... Box
• Walker, C (1999). The ethical consumer and other ethical anomalies.  XXIV Iarep Colloquium. .301.019INT

Questions for discussion

1. Do attitudes and intentions determine investment behaviour?
2. Does moral commitment rather than utility maximisation drive ethical investment?
3. How might the availability of on-line investment impact on individuals and on  financial markets?
4. Is there a single dominant motivation for investment?
5. What causes stock market bubbles and crashes?