David Hirshleifer
Encyclopedia
David Hirshleifer is a prominent American
economist
. He is a professor of finance and currently holds the Merage chair in Business Growth at the University of California at Irvine. He previously held tenured positions at the University of Michigan
, The Ohio State University, and UCLA. His work has focused on behavioral finance
and informational cascades. In 2007, he was ranked as the 73rd most cited economist by web of science
's Most-Cited Scientists in Economics & Business.
, a now deceased prominent UCLA economics professor. He is married to Siew Hong Teoh, Dean's Professor of accounting at the University of California at Irvine. He has served in editorial positions at leading finance journals, including the Journal of Finance
and the Review of Financial Studies
. As of July 2011 he will be Executive Editor of the Review of Financial Studies
.
, theoretical and empirical asset pricing, and corporate finance
. He is best known for his work on information cascades and on investor psychology and its effects on security market underreactions and overreactions. His scholarly work on cascades has also had a significant impact on popular economics, with references in mainstream business and economics media. He is a contributor to the fields of behavioral economics and behavioral finance
.
Much of his work on investor psychology has focused on the effects of biased self-attribution, overconfidence, and limited attention. He and his co-authors were awarded the 1999 Smith Breeden Award for research showing how investor overconfidence, in combination with biased self-attribution, can explain the short-run momentum (finance)
and long-run reversal patterns found the returns of many stock markets. More recent work has shown how investor overconfidence may also help explain the forward premium puzzle in foreign exchange markets
. In his work on limited attention, he has shown that both distracting events and lack of attention to relevant information can help explain important accounting anomalies such as post earnings announcement drift
Hirshleifer's research has taken several creative approaches to show that stock returns are not exclusively based on relevant financial information, but also incorporate factors such as investors' mood and superstitions. His paper "Good Day Sunshine: Stock Returns and the Weather," found abnormally high returns in the New York Stock Exchange
composite on days that it was abnormally sunny in the New York city area. His research on the Chinese initial public offering
market has provided evidence that Chinese companies which contain listing code numbers considered lucky in Chinese culture are initially priced much higher than financially similar Chinese firms debuting with unlucky numbers in their listing codes.
In addition to investor psychology, Hirshleifer's research has also argued that regulator psychology plays an important role in financial markets. This research has garnered attention as the recent financial crisis has led to greater a scrutiny about the process of setting financial regulation.
, and the economist Amihai Glazer, Hirshleifer is the coauthor of the microeconomics textbook Price Theory and Applications: Decisions, Information, and Markets.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
. He is a professor of finance and currently holds the Merage chair in Business Growth at the University of California at Irvine. He previously held tenured positions at the University of Michigan
University of Michigan
The University of Michigan is a public research university located in Ann Arbor, Michigan in the United States. It is the state's oldest university and the flagship campus of the University of Michigan...
, The Ohio State University, and UCLA. His work has focused on behavioral finance
Behavioral finance
Behavioral economics and its related area of study, behavioral finance, use social, cognitive and emotional factors in understanding the economic decisions of individuals and institutions performing economic functions, including consumers, borrowers and investors, and their effects on market...
and informational cascades. In 2007, he was ranked as the 73rd most cited economist by web of science
Web of Science
ISI Web of Knowledge is an academic citation indexing and search service, which is combined with web linking and provided by Thomson Reuters. Web of Knowledge coverage encompasses the sciences, social sciences, arts and humanities. It provides bibliographic content and the tools to access, analyze,...
's Most-Cited Scientists in Economics & Business.
Background
He is the son of Jack HirshleiferJack Hirshleifer
Jack Hirshleifer was an American economist and long-time professor at the University of California, Los Angeles....
, a now deceased prominent UCLA economics professor. He is married to Siew Hong Teoh, Dean's Professor of accounting at the University of California at Irvine. He has served in editorial positions at leading finance journals, including the Journal of Finance
Journal of Finance
The Journal of Finance is a peer-reviewed academic journal published by Wiley-Blackwell on behalf of the American Finance Association. It was established in 1946. Its current editors are Campbell R. Harvey and John R. Graham...
and the Review of Financial Studies
Review of Financial Studies
The Review of Financial Studies is an academic journal published by Oxford University Press on behalf of the Society for Financial Studies. It was established following discussions at the 1986 Western Finance Association meetings, and the first issue was published in 1988...
. As of July 2011 he will be Executive Editor of the Review of Financial Studies
Review of Financial Studies
The Review of Financial Studies is an academic journal published by Oxford University Press on behalf of the Society for Financial Studies. It was established following discussions at the 1986 Western Finance Association meetings, and the first issue was published in 1988...
.
Research
Hirshleifer's research areas include the modeling of social influenceSocial influence
Social influence occurs when an individual's thoughts, feelings or actions are affected by other people. Social influence takes many forms and can be seen in conformity, socialization, peer pressure, obedience, leadership, persuasion, sales, and marketing...
, theoretical and empirical asset pricing, and corporate finance
Corporate finance
Corporate finance is the area of finance dealing with monetary decisions that business enterprises make and the tools and analysis used to make these decisions. The primary goal of corporate finance is to maximize shareholder value while managing the firm's financial risks...
. He is best known for his work on information cascades and on investor psychology and its effects on security market underreactions and overreactions. His scholarly work on cascades has also had a significant impact on popular economics, with references in mainstream business and economics media. He is a contributor to the fields of behavioral economics and behavioral finance
Behavioral finance
Behavioral economics and its related area of study, behavioral finance, use social, cognitive and emotional factors in understanding the economic decisions of individuals and institutions performing economic functions, including consumers, borrowers and investors, and their effects on market...
.
Much of his work on investor psychology has focused on the effects of biased self-attribution, overconfidence, and limited attention. He and his co-authors were awarded the 1999 Smith Breeden Award for research showing how investor overconfidence, in combination with biased self-attribution, can explain the short-run momentum (finance)
Momentum (finance)
In finance, momentum is the empirically observed tendency for rising asset prices to rise further, and falling prices to keep falling. For instance, it was shown that stocks with strong past performance continue to outperform stocks with poor past performance in the next period with an average...
and long-run reversal patterns found the returns of many stock markets. More recent work has shown how investor overconfidence may also help explain the forward premium puzzle in foreign exchange markets
. In his work on limited attention, he has shown that both distracting events and lack of attention to relevant information can help explain important accounting anomalies such as post earnings announcement drift
Post earnings announcement drift
In Financial Economics post–earnings-announcement drift, or PEAD is the tendency for a stock’s cumulative abnormal returns to drift in the direction of an earnings surprise for several weeks following an earnings announcement.Once a firm's current earnings become known, the information content...
Hirshleifer's research has taken several creative approaches to show that stock returns are not exclusively based on relevant financial information, but also incorporate factors such as investors' mood and superstitions. His paper "Good Day Sunshine: Stock Returns and the Weather," found abnormally high returns in the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
composite on days that it was abnormally sunny in the New York city area. His research on the Chinese initial public offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
market has provided evidence that Chinese companies which contain listing code numbers considered lucky in Chinese culture are initially priced much higher than financially similar Chinese firms debuting with unlucky numbers in their listing codes.
In addition to investor psychology, Hirshleifer's research has also argued that regulator psychology plays an important role in financial markets. This research has garnered attention as the recent financial crisis has led to greater a scrutiny about the process of setting financial regulation.
Books
Together with his father, Jack HirshleiferJack Hirshleifer
Jack Hirshleifer was an American economist and long-time professor at the University of California, Los Angeles....
, and the economist Amihai Glazer, Hirshleifer is the coauthor of the microeconomics textbook Price Theory and Applications: Decisions, Information, and Markets.
Selected publications
- Hirshleifer, Jack., Glazer, Amihai, and Hirshleifer, David, Price theory and applications: Decisions, markets, and information. Cambridge University Press, 7th Edition: 2005.
- Sushil Bikhchandani, David Hirshleifer, and Ivo WelchIvo WelchIvo Welch is an American economist at UCLA. His work has focused on financial economics and informational cascades. In 2007, he was ranked as the 54th most cited economist by web of science's Most-Cited Scientists in Economics&Business...
. "A Theory of Fads, Fashion, Custom, and Cultural Change as Informational cascades." Journal of Political Economy, Vol. 100, No.5, pp. 992–1026, 1992.
External links
- http://web.merage.uci.edu/~Hirshleifer/ David Hirshleifer's website.
- http://www.in-cites.com/nobel/2007-eco-top100.html Most-Cited Scientists in Economics & Business.
- Sushil Bikhchandani, David Hirshleifer, and Ivo WelchIvo WelchIvo Welch is an American economist at UCLA. His work has focused on financial economics and informational cascades. In 2007, he was ranked as the 54th most cited economist by web of science's Most-Cited Scientists in Economics&Business...
. "A Theory of Fads, Fashion, Custom, and Cultural Change as Informational cascades." Journal of Political Economy, Vol. 100, No.5, pp. 992–1026, 1992.