Bubbles, Human Judgment, and Expert Opinion
Research in psychology and behavioral ﬁnance is surveyed for evidence to what extent experts such as professional investment managers or endowment trustees may behave in such a way as to help perpetuate speculative bubbles in ﬁnancial markets. This paper discusses scholarly psychological literature on the representativeness heuristic, overconﬁdence, attentional anomalies, self-esteem, conformity pressures, salience and justiﬁcation for insights into weaknesses in expert opinion. The role of the prudent person standard and the news media in influencing experts is considered. The relevance of the literature on testing of the eﬀicient markets theory is discussed.
Shiller, Robert J., "Bubbles, Human Judgment, and Expert Opinion" (2001). Cowles Foundation Discussion Papers. 1557.