Bests & Worsts Reviews from Amazon

"Inefficient Markets" is the most thoughtful original treatment of behavioral finance I have found. Unlike most other books on this topic, which either are vapidly light but original or are intellectually rewarding but disjointed compendiums of previously published articles, Shleifer has produced an interesting and intelligent synthesis of behavioral finance. He organizes his materially logically and clearly, covering the central themes of behavioral finance in as unified a manner as the subject permits. He has clearly thought hard about the subject matter, and his book reflects this. Shleifer's writing style is both lucid and academically rigorous, which makes for an enjoyable and informative book. Shleifer begins by reviewing the theoretical and empirical foundations of the efficient market hypothesis (EMH) and introducing the principal challenges to this hypothesis. His review of the EMH is careful, objective, and respectful. His introduction to the principal challenges to the EMH is written with equal integrity, and his analysis of these challenges is non-dogmatic and relatively conservative. He carefully avoids overstating the conclusions of the academic research. While Shleifer clearly feels that financial markets are NOT efficient, as an academic he also acknowledges the inability of empirical research to PROVE with certainty that financial markets are or are not efficient. It is his careful interpretation of the evidence on both sides of the EMH fence that gives this book its tremendous credibility. The majority of "Inefficient Markets" covers the two principal building blocks of behavioral finance: the theory of limited arbitrage and the theory of investor sentiment. Shleifer demonstrates that arbitrage is of limited usefulness in relatively competitive markets, much less in more complicated environments, and that financial markets should not be presumed efficient. He then presents a model of investor sentiment that incorporates the results of experimental research into individual decision-making under conditions of uncertainty. Shleifer also provides an extremely clear overview of the DeLong et al. noise trader model, and concludes the book by highlighting some of the unsolved problems in financial economics. It should be noted, if it is not already clear, that this book is intended for PhD and advanced MBA students (in fact, the book is a core text for the University of Chicago's PhD course in Behavioral Finance). The analysis in the book is both theoretical and rigorous. Nonetheless, the intellectually curious reader with a basic exposure to microeconomics and/or financial economics will find the book rewarding. You are guaranteed to come away from this book knowing more about that opportunities and challenges facing the field of behavioral finance. For practitioners, or anyone looking for a more general/popular treatment of behavioral finance, I recommend "Beyond Greed and Fear" by Hersh Shefrin.