Normal Investors, Then and Now

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CFA Digest
August 2005 | Vol. 35 | No. 3 | 2 pages
Source: CFA Institute
Meir Statman
Meir Statman (Reviewer)

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Abstract

In the early years of the investment industry, investors were considered to be “normal.” But then starting in the late 1950s, investors were thought to be “rational.” Having gone full circle, investors are again considered to be “normal.” The portrait of investors as rational is the first foundation block of standard finance—other blocks being market efficiency, mean–variance portfolio theory, and the capital asset pricing model. This article provides descriptions of normal investors as they were portrayed in the Financial Analysts Journal and other finance journals before standard finance was introduced and as they have emerged recently in behavioral finance.

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Topics
Portfolio Management
    :
  • Portfolio Concepts from Capital Market Theory
|
Behavioral Finance
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