Behavioral finance - 11/1/2011 Chapter 22 Chapter 22...

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11/1/2011 1 Chapter 22 Behavioral Finance: Implications for Financial Management Chapter 22 Behavioral Finance: Implications for Financial Management Chapter Outline Prospect Theory Biases Mental Accounting Framing Effects Heuristics Behavioral Finance and Market Efficiency Market Efficiency and the Performance of Professional Money Managers 22-2
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11/1/2011 2 Prospect Theory Tversky and Kahneman (1979) found that contrary to expected utility theory, people placed different weights on gains and losses and on different ranges of probability. Overconfidence Example: 80 percent of drivers consider themselves to be above average Overconfidence is tied to self-attribution bias, which leads people to attribute success to their own skill, while poor results are attributed to bad luck.
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11/1/2011 3 Overconfidence Which gender is more overconfident? Men Women Barber and Odean (2001) recently analyzed the trading activities of people with discount brokerage accounts. They
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This note was uploaded on 02/13/2012 for the course FINC 3132 taught by Professor Zhang during the Spring '12 term at Georgia Southern University .

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Behavioral finance - 11/1/2011 Chapter 22 Chapter 22...

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