Behavioral Finance Research Initiative

Behavioral Finance is one of the most exciting and controversial areas of research in Economics. It focuses on the psychology and behavior of individual economic agents, and explores the implications for asset pricing, regulation and management. It is, by its nature, interdisciplinary and relies on psychologists, sociologists, behavioral decision theorists, marketing researchers, financial economics, macroeconomists and accounting researchers, among others The Yale ICF behavioral finance research initiative is one of the most active behavioral research programs in the world. The current research agenda includes:

Asset pricing: bubbles, momentum, investment sentiment, psychology of overreaction and underreaction.
Investment: investor sentiment, investor confidence, bubbles.
Management: relative-value, momentum, stale-prices.
Marketing: consumer choice, clientele change.

Participating scholars at Yale include:

• Judith Chevalier (link to papers)
• Ravi Dhar (link to papers)
• William N. Goetzmann (link to papers)
• Owen Lamont (link to papers)
• Robert Shiller (link to papers)
• Shyam Sunder (link to papers)
• Ivo Welch (link to papers)

Participating scholars from other institutions include:

• John Griffin, University of Arizona, visiting Yale SOM during Spring 03 and Fall 03 (link to papers)
• Mark Grinblatt, UCLA, visiting Yale SOM during Fall 00 and Spring 01 (link to papers)
• Itzhak Venezia, Hebrew University, visiting Yale SOM during Fall 02 and Spring 03 (link to papers)

Selected Publications and Working Papers on Behavioral Finance by ICF Program Participants:

Identifying Investor Sentiment from Price Paths: The Case of Football Betting
Journal of Business, Vol. 72, Issue 4, October 1999
Christopher Avery and Judith A.Chevalier

Are Some Mutual Funds Managers Better Than Others? Cross-Sectional Patterns in Behavior and Performance
Judith A.Chevalier and Glenn Ellison

Career Concerns of Mutual Fund Managers
Judith A.Chevalier and Glenn Ellison

A Non-Random Walk Down the Main Street: Impact of Price Trends on Trading Decisions of Individual Investors
Ravi Dhar and Alok Kumar

The Impact of Clientele Changes: Evidence from Stock Splits
Ravi Dhar ,William N.Goetzmann and Ning Zhu

Up Close and Personal: An Individual Level Analysis of the Disposition Effect
Ravi Dhar and Ning Zhu

Daily Momentum and Contrarian Behavior of Index Fund Investors
William N.Goetzmann and Massimo Massa

Equity Portfolio Diversification
William N.Goetzmann and Alok Kumar

Investor Sentiment in Japanese and U.S. Daily Mutual Fund Flows
Stephen J.Brown , William N.Goetzmann , Takato Hiraki , Noriyoshi Shiraishi and
Masahiro Watanabe

Short Sale Constraints and Stock Returns
Charles M.Jones and Owen A.Lamont

Why do Biased Heuristics Approximate Bayes Rule in Double Auctions?
Karim Jamal and Shyam Sunder

Management Controls, Expectations, Common Knowledge and Culture
Journal of Management Accounting Research, Vol. 14, pp. 173-187, 2002
Shyam Sunder

Stock Market as a 'Beauty Contest': Investor Beliefs and Price Bubbles sans Dividend Anchors
Shinichi Hirota and Shyam Sunder

An Economic Approach to the Psychology of Change: Amnesia, Inertia, and Impulsiveness
David A.Hirshleifer and Ivo Welch

On the Evolution of Overconfidence and Entrepreneurs
Antonio Bernardo and Ivo Welch

Views of Financial Economists on the Equity Premium and on Professional Controversies
Ivo Welch

Momentum Investing and Business Cycle Risk: Evidence from Pole to Pole
John M.Griffin , Susan Ji and J. SpencerMartin

The Dynamics of Institutional and Individual Trading
John M.Griffin , Jeffrey H.Harris and Selim Topaloglu

Daily Cross-border Equity Flows: Pushed or Pulled?
John M.Griffin , Federico Nardari and Rene M.Stulz

Distance, Language, and Culture Bias: The Role of Investor Sophistication
Mark Grinblatt and Matti Keloharju

Momentum Investment Strategies, Portfolio Performance, and Herding: A Study of Mutual Fund Behavior
Mark Grinblatt , Sheridan Titman and Russ Wermers

The Disposition Effect and Momentum
Mark Grinblatt and Bing Han

Doctoral Student Research include:

Rebels, Conformists, Contrarians and Momentum Traders
Evan Gatev and Stephen A. Ross

Behavior and Performance of Investment Newsletters Analysts
Alok Kumar and Vicente Pons-Sanz

The Local Bias of Individual Investors
Ning Zhu

Data Resources for ICF Fellows

Related Links of Interest