Two relevant areas in the behaviorist literature are prospect theory and overconfidence. Many tests are available to elicit their different manifestations: utility curvature, probability weighting and loss aversion in PT; overestimation, overplacement and overprecision as measures of...

We examine informational efficiency in retail credit markets to test whether behavioral biases by participants in the banking industry might explain credit cycles. We offer a simple model of herding and limits of arbitrage in retail credit markets that follows the behavioral approach of Shleifer...

2008 world financial meltdown highlighted significant shortcomings on procedures used by the banking sector to provide credit to the real economy. A long period of indulgence granting personal loans and mortgages that boosted a credit bubble all over the world has been followed by an era of...

Purpose: The efficient market hypothesis (EMH) states that asset prices in financial markets always reflect all available information about economic fundamentals. The purpose of this paper is to provide a guide as to which predictions of the EMH seem to be borne out by empirical evidence....

We offer a simple model of herding and limits of arbitrage in retail credit markets that follows the behavioral approach of Shleifer (2000). We show why solely behavioral biases by participants in the industry could explain how a credit bubble might be fed by the banking sector. According to our...