Richard Thaler’s Influence on Investors

Richard Thaler, who was just awarded a Nobel Prize in Economics, “upended how people think about financial markets, helping found the field of behavioral finance,” according to an article in The Wall Street Journal. As Justin Lahart of WSJ put it, “Nobody gets a Nobel Prize for saying that stupid things happen in financial markets. One of the reasons economist Richard Thaler just got one is that he helped explain why.” Thaler’s research challenged the widely accepted view that the financial markets operate efficiently, incorporating new information “to reflect the underlying asset values.” In the 1980s, the article says, Thaler […]

Four Thaler-Inspired Takeaways Investors Can Learn From

By John P. Reese — It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity… So begins the celebrated classic, A Tale of Two Cities–Charles Dickens’ novel set during the French Revolution–but this opening paragraph could just as easily lead into a stock market chronicle outlining the vagaries of business cycles, stock price volatility and investor behavior. Which may explain why, after last week’s announcement that University of Chicago professor Richard Thaler has been […]

Shiller on Behavioral Economics

An interview with Robert J. Shiller, the recipient of the 2013 Nobel Prize in economics, was recently published in Pacific Standard magazine. The discussion centered on the advent of behavioral economics—the introduction of other social sciences into the field of economics. “It’s a revolution in economics that has taken place over the past 20 years or so. It’s bringing economics into a broader appreciation of reality,” says Shiller. While traditional economics has focused on the workings of a market based on “ideally rational” individuals, Shiller says that behavioral economics introduces the notion that we don’t always behave in our own […]