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Published online by Cambridge University Press: 17 February 2009
A recent survey by David Hirshleifer on investor psychology and asset pricing opens with a short story describing what might have happened to asset-pricing theory, had the founding fathers of modern finance not focused on rationality as the core of their thinking about financial markets, but, instead, followed Adam Smith, Irving Fisher, John Maynard Keynes and Harry Markowitz, who thought that psychology had a large impact on the outcome of financial markets. Had this path of theorizing been taken, today there might have been an influential school at the University of Chicago advocating the Deficient Markets Hypothesis and a Stanford psychologist would have become the inventor of a prominent asset-valuation model, the so-called DAPM (Deranged Anticipation and Perception Model).
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35 Berkowitz, Pistor and Richard, supra n. 7.
36 See LLSV, supra n. 3.
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47 Heine, Oltmanns and Stahl, supra n. 42, would have had a maximum sample size of 22 countries. Therefore, the corresponding estimation results are not reported there.
48 This measure ranges theoretically from 0 (“no correlation”) to 1 (“perfect correlation”).
49 Small values (less than 0.1,0.05 or 0.1) mean that the estimated parameter has a significant influence. See, for instance, 0.059 in Table 2 for the (medium) significance of CONTROL on LTPDY.
50 Levine, supra n. 38.
51 Heine, Oltmanns and Stahl, supra n. 42.
52 For the assumptions underlying the method of constructing these proxies see Heine, Oltmanns and Stahl, supra n. 42.
53 Levine, supra n. 38.
54 Heine, Oltmanns and Stahl, supra n. 42.
55 Heine, Oltmanns and Stahl, supra n. 42.
56 Heine, Oltmanns and Stahl, supra n. 42.
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