Nationality United States Name David Hirshleifer | Role Economist Parents Jack Hirshleifer | |
Institution Paul Merage School of Business at UC Irvine Alma mater University of ChicagoUniversity of California, Los Angeles Contributions information cascades theory; theory of investor under- and over-reactions Awards Smith Breeden Award, 1999 for outstanding paper in the Journal of Finance Books The Use of Lockup Options in Corporate Acquisitions: Theory and Evidence Fields Financial economics, Behavioral economics, Investment | ||
David Hirshleifer is an American economist. He is a professor of finance and currently holds the Merage chair in Business Growth at the University of California at Irvine. In 2017, he is elected as Vice President of the American Finance Association (AFA) and assigned as Research Associate to National Bureau of Economic Research. He was previously a professor at the University of Michigan, The Ohio State University, and UCLA. His research is mostly related to behavioral finance and informational cascades. In 2007, he was on the Top 100 list of most cited economist by web of science's Most-Cited Scientists in Economics & Business.
Contents
Background
David is the son of Jack Hirshleifer, a deceased UCLA economics professor. He is married to Siew Hong Teoh, Dean's Professor of accounting at the University of California at Irvine. He served in editorial position for the Journal of Finance from 2003 to 2011. In addition, he also served as editor from 2001 to 2007 and executive editor from 2011 to 2014 for the Review of Financial Studies.
Research
Hirshleifer's research areas include the modeling of social influence, theoretical and empirical asset pricing, and corporate finance. He is the originators of the theory of information cascades, and has modeled investor psychology and its effects on security market under- and over-reactions. His scholarly work on cascades has also received attention from popular economics, with references in both mainstream business and economics media. He is a contributor to the fields of behavioral economics and behavioral finance.
Much of his work on investor psychology has focused on the effects of biased self-attribution, overconfidence, and limited attention. He and his co-authors were awarded the 1999 Smith Breeden Award for research showing how investor overconfidence, in combination with biased self-attribution, can explain the short-run momentum (finance) and long-run reversal patterns found the returns of many stock markets. More recent work has shown how investor overconfidence may also help explain the forward premium puzzle in foreign exchange markets . In his work on limited attention, he has shown that both distracting events and lack of attention to relevant information can help explain important accounting anomalies such as post earnings announcement drift
Hirshleifer's research has taken several approaches to show that stock returns are not exclusively based on relevant financial information, but also incorporate factors such as investors' mood and superstitions. His paper "Good Day Sunshine: Stock Returns and the Weather," found abnormally high returns in the New York Stock Exchange composite on days that it was abnormally sunny in the New York city area. His research on the Chinese initial public offering market has provided evidence that Chinese companies which contain listing code numbers considered lucky in Chinese culture are initially priced much higher than financially similar Chinese firms debuting with unlucky numbers in their listing codes.
In addition to investor psychology, Hirshleifer also examines behavior of different parties in financial market. His work with Usman Ali developed a method to identify insider tradings for a firm, which can be used to predict this firm's opportunistic behavior such as earnings management, restatements, SEC enforcement actions, shareholder litigation, and executive compensation. This paper is later reported by Justin Lahart on Wall Street Journal. His research, "Psychological Bias as a Driver of Financial Regulations", argued that regulator psychology plays an important role in financial markets. This research has garnered attention as the recent financial crisis has led to greater a scrutiny about the process of setting financial regulation.
Books
Together with his father, Jack Hirshleifer, and the economist Amihai Glazer, Hirshleifer is the coauthor of the microeconomics textbook Price Theory and Applications: Decisions, Information, and Markets.