A Behavioral Model For Stock Prices

N Lalitha, D N Rao

Abstract


Multi-factor models have been popularly used to explain
asset market behavior. The Fama and French three-factor model
fitted on the sample set of new economy stocks for the study
period of late nineties to early 2000s, however, fails to give
adequate explanation of the stock market behavior. A behavioral
model built on the assumption of bounded rationality and biases in
investor behavior seems to offer a better explanation of the stock
price behavior.

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