Title: Asset Pricing in the Presence of Social Interaction
Abstract: What is the mechanism that determines market prices of financial assets? The literature of modern finance theory brought out models in order to propose an answer to this question. These models presume that all market participants act strictly rationally. With this very restrictive assumption, modern finance models fail to explain short term phenomena, like temporary deviations of the asset price from the fundamental value of the asset, e.g. speculative bubbles, referred as the equity puzzle in this paper. The upcoming literature of behavioural finance theory loosens the restrictive assumptions of modern finance theory in favour of the acceptance of an investor’s irrationality. Many efforts have been undertaken so far to solve the equity puzzle by the aid of the various aspects from behavioural finance.
Publication Year: 2010
Publication Date: 2010-01-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 1
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