Abstract
Observing that many economists have studied the effects of human behavior on investors and the stock market, the author asserts that the growth and collapse of the technology stock “bubble” and the ensuing volatility in the markets have spurred interest in the once-controversial field of behavioral finance. She argues that the catastrophic September 11 terror attacks on the United States have led the role of human behavior in investment decisions to take on new significance. Yet, though markets reacted in dramatic fashion to the September attacks, she wonders whether they were efficiently using new information to reflect a suddenly weaker economy, or simply overreacting based on fear and anxiety. She argues that professional advisors have an important role to play, particularly in difficult times, as they can help their clients decipher in a more dispassionate manner the nature of the investment circumstances and thus select the strategic response most appropriate given their individual needs.
Published Version
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