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    Biography

     

    Andrei Shleifer is John L. Loeb Professor of Economics at Harvard University. He holds an undergraduate degree from Harvard and a Ph.D. from MIT. Before coming to Harvard in 1991, he has taught at Princeton and the Chicago Business School. Shleifer has worked in the areas of comparative corporate governance, law and finance, behavioral finance, as well as institutional economics. He has published seven books, including The Grabbing Hand (with Robert Vishny), Inefficient Markets: An Introduction to Behavioral Finance, and A Crisis of Beliefs:...

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    Bordalo, Pedro, Katherine Coffman, Nicola Gennaioli, Frederik Schwerter, and Andrei Shleifer. Working Paper. “Memory and Representativeness”. Abstract
    We explore the idea that judgment by representativeness reflects the workings
    of episodic memory, especially interference. In a new laboratory experiment on cued
    recall, participants are shown two groups of images with different distributions of
    colors. We find that i) decreasing the frequency of a given color in one group significantly
    increases the recalled frequency of that color in the other group, ii) for a
    fixed set of images, different cues for the same objective distribution entail different
    interference patterns and different probabilistic assessments. Selective retrieval
    and interference may offer a foundation for the representativeness heuristic, but
    more generally for understanding the formation of probability judgments from experienced
    statistical associations.
    Bordalo, Pedro, Nicola Gennaioli, and Andrei Shleifer. Working Paper. “Memory, Attention, and Choice”. Abstract

    Building on the textbook description of associative memory (Kahana 2012), we present a model of choice in which options cue recall of similar past experiences. Recall shapes valuation and choice in two ways. First, recalled experiences form a norm, which serves as an initial anchor for valuation. Second, salient quality and price surprises relative to the norm lead to large adjustments in valuation. The model provides a unified account of many well documented choice puzzles including experience effects, projection and attribution biases, background contrast effects, and context- dependent willingness to pay. The results suggest that well-established psychological processes – memory-based norms and attention to surprising features – are key to understanding decision-making.

    Bordalo, Pedro, Nicola Gennaioli, Yueran Ma, and Andrei Shleifer. Working Paper. “Overreaction in Macroeconomic Expectations”. Abstract
    We examine the rationality of individual and consensus professional forecasts of macroeconomic and financial variables using the methodology of Coibion and Gorodnichenko (2015), which focuses on the predictability of forecast errors from earlier forecast revisions. We document two principal findings: forecasters typically over-react to information individual level, while consensus forecasts exhibit under-reaction. To reconcile these findings, we combine the diagnostic expectations model of belief formation from Bordalo, Gennaioli, and Shleifer (2018) with Woodford’s (2003) noisy information model of belief aggregation. The model accounts for the findings, but also yields a number of new implications related to the forward looking nature of diagnostic expectations, which we also test and confirm. Finally, we compare our model to mechanical extrapolation, rational inattention, and natural expectations.

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