1lecture07

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Open Yale Courses ECON 252: Financial Markets Lecture 7 - Behavioral Finance: The Role of Psychology << previous session | next session >> Overview: Behavioral Finance is a relatively recent revolution in finance that applies insights from all of the social sciences to finance. New decision-making models incorporate psychology and sociology, among other disciplines, to explain economic and financial phenomenon, such as erratic stock price variations. Psychological patterns such as overconfidence and perceived kinks in the value function seem to impact financial decision-making, but are not included in classical theories such as the Expected Utility Theory. Kahneman and Tversky's Prospect Theory addresses such issues and sheds light on irrational deviations from traditional decision-making models. Reading assignment: Robert Shiller, Irrational Exuberance , chapters 3, 4, 8, and 9 Jeremy Siegel, Stocks for the Long Run , chapter 19 Fisher, Irving. "The Stock Market Panic in 1929." Journal of the American Statistical Association
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This note was uploaded on 02/08/2012 for the course ECON 252 taught by Professor Robertshiller during the Spring '08 term at Yale.

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1lecture07 -...

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