Professor Bainbridge...on law, politics, religion, culture & food

Ribstein, Behavioral Finance, and Fraud

Larry Ribstein has posted a very provocative new paper arguing that insights from behavioral finance raise serious challenges for the fraud on the market doctrine in securities law. I think he's basically right on both that issue and his larger conclusion that "contrary to the assertions of many of its proponents, the indeterminacy of behavioral economics generally, and behavioral finance in particular, may support reducing rather than increasing legal paternalism." Indeed, I made much the same point in my article Mandatory Disclosure: A Behavioral Analysis.