A Crisis of Beliefs
Investor Psychology and Financial Fragility

Standard economic theory is a very elegant and internally consistent body of mathematics that aims to explain human behavior. This “colossus” has however recently succumbed, in the authors’ words, to a series of “daring and effective hit-and-run attacks,” (p. 140) both from mainstream economists (wi......more

This book was a fun intellectual challenge to engage with a much more rigorous form of behavioural economics than I have previously been exposed to. As the authors state, this book is meant to provide a widely applicable, relevant and empirically tested theory to explain the actions of economic agen......more

As an amateur when it comes to economics, I found this interesting. The idea is to look at surveys and psychology to come up with a more realistic foundation for economics rather than rational idealizations. The authors advocate the idea that expectations are guided by past performance in a way that......more

Gennaioli and Shleifer show how behavior, and specifically diagnostic expectations - i.e the overreaction to both positive and negative news (by investors/lenders in this case), create credit cycles. At times the proofs could get a little hard to follow, but the insights of this book were clear - ov......more

The authors have some pretty good ideas about modeling non-rational belief formation using insights from psychology, but I'm not sure this needed to be a book rather than a paper. The best part of this book for me was that it pointed me to the paper "Capital Market Blind Spots."......more