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New Perspectives on Asset Price Bubbles$
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Douglas D. Evanoff, George G. Kaufman, and A. G. Malliaris

Print publication date: 2012

Print ISBN-13: 9780199844333

Published to Oxford Scholarship Online: April 2015

DOI: 10.1093/acprof:osobl/9780199844333.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 26 September 2021

Asset Bubbles

Asset Bubbles

Insights From Behavioral Finance

(p.318) Chapter 11 Asset Bubbles
New Perspectives on Asset Price Bubbles

Werner de Bondt

Oxford University Press

This chapter comments on the paper Overconfidence and Speculative Bubbles, by José A. Scheinkman and Wei Xiong. In their paper, Scheinkman and Xiong propose a behavioral-based model for studying asset price bubbles and trading volume based on heterogeneous beliefs generated by agents' overconfidence. The chapter presents a detailed overview of behavioral finance from the perspective of asset bubbles and challenges the notion that pure fundamentals and rationality drive decision-making and pricing. It suggests that behavioral issues must be more fully incorporated into decision-making models and concludes by discussing asset price bubbles in view of the financial crisis of the late 2000s.

Keywords:   overconfidence, José A. Scheinkman, Wei Xiong, asset price bubbles, trading volume, behavioral finance, rationality, decision-making, pricing, financial crisis

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