Final Exam Overview - 22:02 Final Exam Overview Behavioral...

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22:02 Final Exam Overview Behavioral Finance Foundations Corportate Governance The Mortgage Crissi Efficient Markets and Investment Decision making 1. Behavioral Finance Traditional Finance Assumes all agent are rational Choices are consistent with expected utility Correctly update based on new info Behavioral Finance Some agents are not fully rational Make systematic mistake based on psychological phenomena Biases Heuristics Framing effects Biases Predisposition toward error Primary types Excessive optimism  Overconfidence Confirmation bias Illusion of control Heuristics
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Rule of thumb used to make a decision Heuristic biases Framing Effects Decisions are influenced by the manner in which the setting for the decision is described Key types of finance Loss aversion  Aversion to a sure loss Group Behavior Polarization: group processes accentuate attitudes toward risk
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This note was uploaded on 01/08/2012 for the course AEM 4230 taught by Professor Bogan,v. during the Fall '08 term at Cornell University (Engineering School).

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Final Exam Overview - 22:02 Final Exam Overview Behavioral...

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