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Selling Hope, Selling RiskCorporations, Wall Street, and the Dilemmas of Investor Protection$
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Donald C. Langevoort

Print publication date: 2016

Print ISBN-13: 9780190225667

Published to Oxford Scholarship Online: June 2016

DOI: 10.1093/acprof:oso/9780190225667.001.0001

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Myths and Skepticism

Myths and Skepticism

(p.7) 1 Myths and Skepticism
Selling Hope, Selling Risk

Donald C. Langevoort

Oxford University Press

After appearing to be such a success for most of the last century, securities regulation as an endeavor is now under great stress. This chapter lays the groundwork for exploring why. Although some of this is a matter of politics and economics, the chapter stresses diversity in investors, in human behavior, and in patterns of competitiveness in the face of immensely powerful incentives. Investors can be biased, but so can the sell-side: indeed, cognitive traits like overconfidence and overoptimism can be highly adaptive. From these perspectives, the chapter takes on debates over market efficiency, disclosure effectiveness, high-frequency trading, regulatory arbitrage, and federalism. It introduces the pervasive self-deception at the heart of much financial behavior.

Keywords:   Securities and Exchange Commission, market efficiency, federalism, disclosure, investor behavior, self-deception

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