Newsmakers

Hersh Shefrin, Leavey’s Mario L. Belotti Professor of Finance, shared his immense experience in behavioral finance in an article for Bloomberg that analyzed investors’ inclinations of tunnel vision, especially under the Trump presidency. The article also questioned the role that psychology played in the choices investors have made as of late.

An excerpt from the article:
For Hersh Shefrin, a finance professor at Santa Clara University and author of a 2007 book on the role of psychology in markets, the rally is just another example of investors’ remarkable penchant for tunnel vision. Shefrin has a favorite analogy to illustrate his point: the great tulip-mania of 17th century Holland.

Even the most casual students of financial history are familiar with the frenzy, during which a rare tulip bulb was worth enough money to buy a mansion. What often gets overlooked, though, is that the mania happened during an outbreak of bubonic plague.

“People were dying left and right,” Shefrin says. “So here you have financial markets sending signals completely at odds with the social mood of the time, with the degree of fear at the time.”

Read the full article here »

Learn more about professor Hersh Shefrin »