Just search article with topic prospect theory

Hi,

The classics to my opinion are:

1) Robert Shiller

http://www.econ.yale.edu/~shiller/data/peratio.html

http://www.econ.yale.edu/~shiller/online/jpmalt.pdf

You cam also use Shiller's CAPE as a measure for the markets optimism or pessimism.

http://www.econ.yale.edu/~shiller/data.htm

2) Richard Thaler

http://faculty.chicagobooth.edu/Richard.Thaler/research/chronological.html

His work on overreaction is illuminating:

http://fac.comtech.depaul.edu/wdebondt/Publications/FurtherEvidence.pdf

http://faculty.chicagobooth.edu/Richard.Thaler/research/pdf/DoSecurityAnalystsOverreact.pdf

See also my humble contribution to the subject regarding D/P ratios.

BR

Elli

http://www.econ.yale.edu/~shiller/data/peratio.html

http://www.econ.yale.edu/~shiller/online/jpmalt.pdf

http://www.econ.yale.edu/~shiller/data.htm

http://faculty.chicagobooth.edu/Richard.Thaler/research/chronological.html

http://fac.comtech.depaul.edu/wdebondt/Publications/FurtherEvidence.pdf

http://faculty.chicagobooth.edu/Richard.Thaler/research/pdf/DoSecurityAnalystsOverreact.pdf

Article The Risk Premium Puzzle

Of course there are measures. However, it really depends on the behavioural issue that you are interested in. For example, "overconfidence",

Hi Faris. There are countless measures or proxies you can use for empirical investigation in behavioural finance. However, your choice of proxy will depend on the particular behavioural finance issue that you want to investigate or examine. For example; underreaction, overinference, conservatism in equity market/returns can be studied using various proxies such as earnings surprise measure, analyst forecast revisions, streaks of earnings surprise etc.

As is obvious from Malki's answer, there has been a lot of work in once again bringing the world of statistics to Behavioral Finance. I myself prefer Ariely Dan's work in defining the Behavioral field and that of Thaler/Goleman. I firmly believe it is mostly a decision making tool so not really a quantitative pursuit. 

Behavioral finance is also the use of expected utility theory.  The best statistical measures for use in utility theory are upper partial moment and lower partial moment (UPM-LPM).  You can handle both Markowitz Reverse-S and Prospect Theory's S-shaped utility functions.

Thank you very much for all contributions . In fact all your answers it is very interesting for me and useful , many thanks my friends.

Best Regards,

i imagine work on measures 'investor sentiment' ranks highly now (with Baker and Wurgler, journal of Finance 2006, being big names). Certainly a lot of people of working on this stuff. Sadly this work is very empirical and so one  often feels its just measures how little will still know about what drives equity returns. 

Drear William Forbes

Thank you very much for your support,

Best Regards,

Dear Faris! In this field of professional knowledge determined by many factors. Among these factors, along with special skills, a lot is determined by intuition, luck and skill to the adoption of non-standard solutions. Be prepared to the chagrin of many stages.

Information cascades; which is related to financial contagions, herding and social learning processes in the financial markets

http://eml.berkeley.edu//~kariv/CK_II.pdf

Dear Vladimir A. Kulchitsky and Shian-Loong Bernard Lew 

Greetings,

Many thanks for your contributions , a lot of information very interesting for me ,

Best Regards,

Just as a brief response I suggest that you take a look at hyperbolic discounting (Thaler's work) to see the differences between actual behavior and the more common discounting (future discounted value, FDV, and presente discount value, PDV) theory. In passing, I have conducted informal assessments with graduate students over the past 5 years in Italy and the US. When first exposed to FDV -- and told the preference effect of time, the role of inflation and so on were in complete agreement with the underlying theory... . BUT, when later offered 100 $ immediately versus 150$ at the end of the semester -- chose the immediate 100$. Perhaps students need money, right? Not really so, in my limited samples. 

Dear Paolo F Ricci

Thank you very much for your contribution ,

Best Regards,

Thank you Paolo! Precise and concise explanation of the complex issue.

Thank you Vladimir A. Kulchitsky , many thanks  my friend for your positive effect.