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Behavioural Finance Spring, 2013 Lecturer: Dr.

Dan Golden For a number of reasons I have chosen not to use a textbook for this module. However the primary sources for my lecture notes are Hersh Shefrin, Beyond Greed and Fear William Forbes, Behavioural Finance John Nofsinger, Investment Madness James Montier, Behavioural Investing

In addition there are sources for particular topics. These include Happiness o Nettle, Happiness, The Science Behind Your Smile o Jonathan Haidt, The Happiness Hypothesis o Richard Layard, Happiness, Lessons from a New Science o Nick Powdthavee, The Happiness Equation Analysts Predictions o See the folder in Blackboard Decision Theory o Ken Binmore, Rational Decisions Discounting o Ainslee, The Breakdown of Will Bubbles o Peter Garber, Famous First Bubbles o Charles Kindleberger and Robert Aliber, Manias, Panics, and Crashes Miscellaneous o Gigerenzer, Gut Feelings o Ariely, Predictably Irrational o Harford, The Logic of Life

More sources will be indicated as the semester progresses. We will cover one or two topics per week. The exact selection and order of topics will depend on time and the interests of the class, but the following is a sample based on the previous delivery of the module: Overview of behavioural finance Financial decision making Discounting Happiness Status

Learning Bubbles Noise Traders Overconfidence Asset Pricing under Prospect Theory Overreaction and/or Underreaction Momentum Herding Equity Premium Puzzle

We will supplement this with some material from the wider area of cognitive science that should provide some background for the topics that are more specifically grouped within behavioural finance. This is an overly ambitious agenda (overconfidence bias?), so undoubtedly some items will be given rather cursory attention.

Assessment My philosophy for the course is that there is way too much ground to cover in a single module. I believe we could easily construct an entire degree in behavioural finance. At the very least we could have one module in behavioural asset pricing, and another module in the cognitive and psychological aspects of behavioural finance. So the best we can do is hit a number of topics in lecture according to taste and time constraints. However I assume that many of you either already have an interest in a few specific topics within behavioural finance, or will find your interest stimulated by a few topics in particular as the course moves along. There will be continuous assessment requiring class participation and a final exam. The essay component of the final exam requires that you display the independent detective work that you do outside of lecture. Sample questions and an explanation of the marking criteria will be posted on Blackboard to guide your preparation. The lectures will hopefully exemplify the attention to hard data and critical thinking that I expect to see in your test essays.