ISSN 1671-3710
CN 11-4766/R

Advances in Psychological Science ›› 2019, Vol. 27 ›› Issue (3): 439-446.doi: 10.3724/SP.J.1042.2019.00439

• Special Section in Honor of the 2017 Nobel Laureate in Economics Richard H. Thaler • Previous Articles     Next Articles

Richard Thaler’s empirical findings and theoretical insights into behavioral finance

ZHU Yao, LI Jianhua, ZHUANG Jin-Ying()   

  1. School of Psychology and Cognitive Science, East China Normal University, Shanghai 200062, China
  • Received:2018-06-18 Online:2019-03-15 Published:2019-01-22
  • Contact: ZHUANG Jin-Ying


Richard H. Thaler is a renowned behavioral finance researcher whose empirical findings and theoretical insights have linked economic and psychological analyses with individual decision-making. This article summarizes Thaler’s findings and introduces them to a larger audience. Thaler and colleagues found systematic price reversals for stocks that underwent extreme long-term gains or losses, wherein past losers went on to far outperform past winners, consistent with the behavioral hypothesis of investor overreaction. Additionally, Thaler and colleagues presented findings suggesting that discount fluctuations in closed-end funds were driven by changes in individual investor sentiment. Finally, Thaler and colleagues explained the equity premium puzzle in terms of so-called myopic loss aversion, wherein investors are assumed to be loss-averse and even long-term investors are assumed to evaluate their portfolios frequently. In conclusion, Thaler played a crucial role in the development of the behavioral finance field by incorporating new human psychology insights into economic analyses.

Key words: “winner-loser” effect;, discounts on closed-end funds, equity premium puzzle, behavioral finance, myopic loss aversion

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