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This paper analyzes the regulatory implications of irrational exuberance and anxiety in securities markets. U.S. federal securities laws mandate the disclosure of certain information, but regulate only the cognitive form and content of that information. An important and unstudied question is how to regulate securities markets where some investors respond not only cognitively to the form and content of information, but also emotionally to the form and content of information. This paper investigates that question when some investors feel exuberance or anxiety that is unjustified by cognitive processing of the available information. This paper develops the implications for mandatory securities disclosure of irrational exuberance and anxiety.


Anxiety, irrational exuberance, mandatory disclosures, securities regulation

Publication Title

The Law and Economics of Irrational Behavior

Publication Citation

In The Law and Economics of Irrational Behavior 501-41 (Francesco Paresi & Vernon Smith eds., Stanford 2005)