Open Yale CoursesECON 252: Financial MarketsLecture 8 - Human Foibles, Fraud, Manipulation, and Regulation<< previous session | next session >>Overview:Regulation of financial and securities markets is intended to protect investors while still enabling them tomake personal investment decisions. Psychological phenomena, such as magical thinking, overconfidence,and representativeness heuristic can cause deviations from rational behavior and distort financial decision-making. However, regulation and regulatory bodies, such as the SEC, FDIC, and SIPC, most of which werecreated just after the Great Depression, are intended to help prevent the manipulation of investors'psychological foibles and maintain trust in the markets so that a broad spectrum of investors will continue toparticipate.Reading assignment:Robert Shiller,
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