SEMINAR: BEHAVIORAL ECONOMICS AND FINANCE
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 some 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: prospect theory; preference reversals and other violations of standard decision theory; the equity premium puzzle and other anomalies in financial markets; new and old theories of bounded rationality; experienced utility and other notions of subjective well-being; neuroeconomic approaches to decision analysis.
Mode of Delivery:
Presentation and discussion of papers. In each of the 10 meetings, two or three papers will be discussed.
An overview of the topics addressed in the course can be found in:
(1) Camerer, C.F., and G. Loewenstein. 2004. Behavioral Economics, in C.F. Camerer and others (Eds.), Advances in Behavioral Economics, Princeton University Press, pp. 3-51.
(2) Barberis, N., and R. Thaler. 2003 A Survey of Behavioral Finance, in G.M. Constantinides, and others (Eds.), Handbook of the Economics of Finance, volume 1, Elsevier, 1053-1128
A detailed reading list will be provided at the beginning of the course.
The assessment of the student’s performance will be based on:
- presentation of papers included in the reading list, and participation to class discussion;
- final exam, or final paper written by the student.
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