Wednesday, August 4, 2010

Money Illusion and a new blog added

With the fall semester rapidly approaching, it's time to get back into blogging.

The Finance Professor blog posted a link on Money Illusion from the Psy-Fi blog. The Psy-Fi blog is new to me, but looks pretty interesting - with a focus on behavioral finance.

Money Illusion, as I've discussed before, is the act of failing to incorporate inflation into financial decisions. Research (including some of my own) has shown that money illusion affects stock prices and house prices. Despite the phenomenon being well documented, new cases of money illusion are always cropping up.