ECON 4370 – Spring 2017

Economics 4370: Behavioral Finance

(Wilson Auditorium 9:30 -10:45 Tues/Thurs)

FINAL EXAMINATION: Friday, May 5, 2016: 2 PM – 5 PM

Before the first day of class, students should have finished reading:

Thinking, Fast and Slow by Daniel Kahneman, Farrar Straus and Giroux, 2011.


Professor Edwin T. Burton

434 924-4054

Office Hours: Tues and Thurs 11-12 AM at 1900 Arlington Blvd Office (see below).

1900 Arlington Blvd; Suite C

(212) 731-2340

burton@virginia.edu

Prospective students should take careful note of the office hour schedule and the office hour location. If this schedule conflicts with your classes or the location is difficult for you, you should consider not taking this course (if office hours are important to you). Also, note exam dates that are posted. There are no make-ups. If you must miss an exam, you will need an excused absence and then your remaining exams will be re-weighted to constitute your overall grade. Not being able to take the final as scheduled will result, at best, in an incomplete. For 4th years, this could jeopardize graduation. Missing any scheduled examination will require and excused absence.

No materials may be used while taking exams. No calculators or other items of any kind. All answers are written by students directly on the examination sheets passed out at the beginning of each exam.


Class meets on Tuesdays and Thursdays from 9:30 AM until 10:45 AM.   There is a considerable amount of reading in this course. The required books are the following:

{Although it is not required reading for this course, those of you who are sports enthusiasts should pick up a copy of Scorecasting by Tobias Moskoitz and Jon Wertheim, 2011. This would be a great book to read during the holidays and is relevant to Economics 437}

Behavioral Finance by Edwin T Burton & Sunit Shah, Wiley, March, 2013.

Inefficient Markets: An Introduction to Behavioral Finance by Andrei Shleifer, Oxford University Press, 2000

The Undoing Project by Michael Lewis, W. W. Norton and Company, 2016

 In addition to the three books above (and the Kahneman book that you have already completed prior to class, there are numerous journal articles that are available through the toolkit for this course.  All students registered in this course have automatic access to these articles.  For copyright reasons, if you are not registered for this course, you cannot access these articles online at the toolkit site, but must find the articles on your own.

Mid Term I, March 2, 2017

Mid Term II, April 6, 2017

Final Exam, May 5, 2016 2 PM – 5 PM in the Wilson Auditorium


Exams are weighted 30% for each of the two mid terms; 40% for the final exam. Some consideration is given to improvement and giving due consideration to a strong final and one strong mid term. This does not, however, mean that an exam score is dropped. All exams count. An excused absence from a mid term means the weights are 3/7 for the other mid term and 4/7 for the final. All exams scores are relative to the mean for that exam.

The final examination is cumulative.  No examination may be skipped without a bona-fide excused absence (illness, etc.).

Please Note: If you cannot make the examinations as scheduled, please do not take this course. We do not give make-up examinations. If you are unable to take the final examination on time as scheduled, you will, at best, receive an incomplete for this course. There are no exceptions.


The Main Topics Covered In This Course Are:

     1. Noise Trader Equibrium Models, Limits to Arbitrage

     2. Irrationalities – the Kahneman Tversky Thaler critique of rationality

     3  Mean Reversion, The Over and Under-reaction Hypotheses, Serial Dependence in Returns

Lectures:

Introduction: January 19, 2017

Readings: Malkiel, Shiller, Schliefer Chapter 1, Fama (Malkiel, Shiller, Fama are online at toolkit site for the course)

Review of EMH: January 24, 2017

Readings: Black on toolkit; Shleifer, Chapter 2 (this is also on toolkit), Burton & Shah, pp. 1-51

More on EMH: January 26, 2017

Noise Trading: Black, Shleifer: January 31 – February 2, 2017

Noise Trading: Shleifer: February 7, 2017

Readings: Burton & Shah, Chapter 8, pp. 81 – 92

Expected Utility Theory, Risk Aversion: February 9, 2017

More on Expected Utility: February 14, 2017

Readings: “The Undoing Project” by Michael Lewis

Biases and Heuristics: February 16, 2017

More on Biases: February 21, 2017

Additional Office Hours This Week:  Wed, Friday 11-12 at VNB Office

More Random Biases: February 23, 2017

Tuesday, February 28, 2017: Class is cancelled

Thursday, March 2nd, 2017:  First Preliminary Examination

Spring Break: March 4th – March 12th, 2017

Endowment and Status Quo Effects: Tuesday, March 14, 2017

Loss Aversion, March 16, 2017

Tuesday, March 21, 2017: No Class

Thursday, March 23, 2017: Guest Lecture by Sunit Shah on Loss Aversion

Please Note:  The grading review for the first mid-term exam is on Friday, March 31st from 9 – 11 AM in the basement of Monroe Hall.  If you are unable to make that time, you will need to email, in advance, Ben Leyden (btl3yv@virginia.edu), stating which questions you want reviewed and specifically why you disagree with the grading.

Readings: Fama-French Article on Collab

Tuesday, March 28, 2017: Fama-French

Readings:  Burton-Shah: Chapters 9 and 11

Thursday, March 30, 2017: Value Investing

Tuesday, April 4, 2017: Predictability in Stock Returns

Thursday, April 6, 2017:  Second Mid-Term Examination

Readings (starting April 10, 2017): Burton-Shah: Chapters 14, 15, 16; DeBondt-Thaler 1984 (on Collab); Jegadeesh-Titman 1993 (on Collab)

Tuesday, April 11, 2017: More on Predictability

Readings (starting April 13, 2017: Introduction in Haugen & Baker, Introduction and Conclusion in Lakonishok, Vishny & Shleifer, both articles on Collab in Resources/New Research

Thursday, April 13, 2017: LSV, Haugen-Baker

Readings (starting April 18, 2017): Burton-Shaw, Chapters 17, 18

Tuesday, April 18, 2017: Equity Premium Puzzle, Calendar Effects

Thursday, April 20, 2017: Corporate Governance

(Second Mid-Term Examinations can be retrieved on Monday, April 24th between 10 AM and Noon in the basement of Monroe Hall.  Grading reviews will be held from 1PM until 3PM on Friday, April 28th in the basement of Monroe Hall)

Tuesday, April 25-27, 2017: More on Corporate Governance

Tuesday, May 2, 2017: Last Class: Review for Final Exam

Friday, May 5, 2017: Final Exam, 2-5 PM Wilson Auditorium