Investments, tenth edition

   Information Processing 

 Errors in information processing can lead investors to misestimate the true probabilities 

of possible events or associated rates of return. Several such biases have been uncovered. 

Here are four of the more important ones. 

  

1

 The discussion in this section is largely based on Nicholas Barberis and Richard Thaler, “A Survey of  Behavioral 

Finance,” in the  Handbook of the Economics of Finance,  eds. G. M. Constantinides, M. Harris, and R. Stulz 

(Amsterdam: Elsevier, 2003). 

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7/17/13   3:46 PM

7/17/13   3:46 PM

Final PDF to printer

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  Equilibrium in Capital Markets