BEHAVIORAL ECONOMICS AND FINANCE: PAST AND PRESENT
Behavioral economics is a flourishing research programme in recent economic analysis. Generally speaking, behavioral economics studies the effects of cognitive, social, and emotional factors on individual economic behavior, and the aggregate consequences of this behavior on market equilibria and prices. Behavioral models typically integrate insights from psychology with standard economic theory based on utility maximization, and are often based on experimental evidence. Behavioral finance is a subfield of behavioral economics that studies the effects of psychological factors on financial decisions and, at the aggregate level, the equilibrium prices of financial assets.
The course surveys past and present research in behavioral economics and finance. At the end of it, the student will be familiar with the main concepts, methods, and theories of this important area of recent economic research.
Basic knowledge of microeconomic theory
The topics of the course include: reference-dependence and loss-aversion; prospect theory; new and old theories of bounded rationality; fairness and social preferences; financial market anomalies and theories
The assessment of the student’s performance will be based on her/his participation to class discussion and her/his presentation of papers included in the reading list.
An overview of the topics addressed in the course can be found in:
C.F. Camerer, G. Loewenstein, “Behavioral economics: Past, Present, Future”, in C.F. Camerer, G. Loewenstein, M. Rabin (eds), Advances in Behavioral Economics, Princeton University Press, 2004, pp. 3-51. A detailed reading list will be provided at the beginning of the course.
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