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A behavioral theory thus requires both an irrational disturbance and limited arbitrage which does not counter it. (Shleifer, 2000) Identify and discuss the irrational disturbance
"A behavioral theory thus requires both an irrational disturbance and limited arbitrage which does not counter it." (Shleifer, 2000)
- Identify and discuss the "irrational disturbance" underlying over and underreaction in financial markets.
- Identify and discuss the "irrational disturbance" underlying the equity premium puzzle.
- Critically discuss the reasons for arbitrage limitations.
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