The Potential Contributions of Behavioral Finance to Post Keynesian and Institutionalist Finance Theories
MatthEw V. FuNg
The potential contributions of behavioral finance to Post Keynesian and institutionalist finance theories
Abstract: In their paper “Behavioral Finance and Post Keynesian–Institutionalist
Theories of Financial Markets,” Raines and Leathers discuss how the theories of Keynes, Davidson, and Galbraith could explain financial bubbles and crises and show how those theories are both confirmed by actual events and supported by some findings in behavioral finance. The current paper comments on their discussion and explores the potential contributions of behavioral finance to future developments of Post Keynesian and Institutionalist theories in other fields in finance, especially portfolio theory and asset pricing theory.
Key words: asset pricing theory, behavioral finance, financial bubbles, portfolio theory. the focus of the Raines and Leathers paper, “Behavioral Finance and
Post Keynesian–Institutionalist theories of Financial Markets,” in the current issue of this journal (pp. 539–553) is to show how the work of
John Maynard Keynes, Paul Davidson, and John Kenneth galbraith have certain “behavioral tendencies” and how their theories are both confirmed by actual events and the findings of behavioral finance. another aim of their paper is to analyze how some economists have applied findings of behavioral finance to modify but not fundamentally change neoclassical theories, and to argue that the resulting models are incompatible with
Post Keynesian and Institutionalist economics. this critical review of behavioral finance was the kind of response I was hoping for when I wrote the paper “Developments in Behavioral Finance and Experimental
Economics and Post Keynesian Finance theory,” published in the fall
2006 issue of this journal.
Matthew V. Fung is an associate professor in the Department of Economics and Finance at Saint Peter’s College.
Journal of Post Keynesian Economics / Summer 2011, Vol. 33, No. 4 555
© 2011 M.E.
The potential contributions of behavioral finance to Post Keynesian and institutionalist finance theories
Abstract: In their paper “Behavioral Finance and Post Keynesian–Institutionalist
Theories of Financial Markets,” Raines and Leathers discuss how the theories of Keynes, Davidson, and Galbraith could explain financial bubbles and crises and show how those theories are both confirmed by actual events and supported by some findings in behavioral finance. The current paper comments on their discussion and explores the potential contributions of behavioral finance to future developments of Post Keynesian and Institutionalist theories in other fields in finance, especially portfolio theory and asset pricing theory.
Key words: asset pricing theory, behavioral finance, financial bubbles, portfolio theory. the focus of the Raines and Leathers paper, “Behavioral Finance and
Post Keynesian–Institutionalist theories of Financial Markets,” in the current issue of this journal (pp. 539–553) is to show how the work of
John Maynard Keynes, Paul Davidson, and John Kenneth galbraith have certain “behavioral tendencies” and how their theories are both confirmed by actual events and the findings of behavioral finance. another aim of their paper is to analyze how some economists have applied findings of behavioral finance to modify but not fundamentally change neoclassical theories, and to argue that the resulting models are incompatible with
Post Keynesian and Institutionalist economics. this critical review of behavioral finance was the kind of response I was hoping for when I wrote the paper “Developments in Behavioral Finance and Experimental
Economics and Post Keynesian Finance theory,” published in the fall
2006 issue of this journal.
Matthew V. Fung is an associate professor in the Department of Economics and Finance at Saint Peter’s College.
Journal of Post Keynesian Economics / Summer 2011, Vol. 33, No. 4 555
© 2011 M.E.