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Neglected Risks: The Psychology of Financial Crises / Nicola Gennaioli, Andrei Shleifer, Robert Vishny.
- Format:
- Book
- Author/Creator:
- Gennaioli, Nicola.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w20875.
- NBER working paper series no. w20875
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Neglected Risks
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2015.
- Summary:
- We model a financial market in which investor beliefs are shaped by representativeness. Investors overreact to a series of good news, because such a series is representative of a good state. A few bad news do not change investor minds because the good state is still representative, but enough bad news leads to a radical change in beliefs and a financial crisis. The model generates debt over-issuance, "this time is different" beliefs, neglect of tail risks, under- and over-reaction to information, boom-bust cycles, and excess volatility of prices in a unified psychological model of expectations.
- Notes:
- Print version record
- January 2015.
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