Attention, Psychological Bias, and Social Interactions (Presentation Slides, for Finance Theory Group Wharton Summer School)

Abstract

This is the long version of presentation slides on "Attention, Psychological Bias, and Social Interactions." Many of the psychological biases studied in behavioral finance derive from limited cognitive processing power. I will discuss a general framework for modeling limited attention and economic decisions, and applications to financial issues. I will then turn to how limited attention and other psychological factors bias the transmission of information and behaviors between financial decision makers. I will describe applications of these ideas to the evolution of agents’ beliefs, trading or project decisions, asset pricing and return anomalies, and consumption/saving decisions.