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. He was previously a professor at the University of Michigan, The Ohio State University, and UCLA. He researched behavioral finance and informational cascades. In 2007, he was ranked as the 73rd most cited economist by web of science's Most-Cited Scientists in Economics & Business .
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 has served in editorial positions in finance journals such as the Journal of Finance and the Review of Financial Studies.
Hirshleifer's research areas include the modeling of social influence, theoretical and empirical asset pricing, and corporate finance. He is best known for his work on information cascades and on investor psychology and its effects on security market underreactions and overreactions. His scholarly work on cascades has also had an impact on popular economics, with references in 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's research has also 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.
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.
- Hirshleifer, Jack., Glazer, Amihai, and Hirshleifer, David, Price theory and applications: Decisions, markets, and information. Cambridge University Press, 7th Edition: 2005.
- Sushil Bikhchandani, David Hirshleifer, and Ivo Welch. "A Theory of Fads, Fashion, Custom, and Cultural Change as Informational cascades." Journal of Political Economy, Vol. 100, No.5, pp. 992–1026, 1992.