Behavioral Finance

(3 Credits)

This course uses human psychology and market frictions to shed light on asset returns, corporate finance patterns, and various Wall Street institutional practices. It starts with motivating evidence of return predictability in stock, bond, foreign exchange, and other markets. The course then proceeds to themes including the role of arbitrageurs in financial markets, the psychological and judgmental biases of average investors, and the financing patterns (such as capital structure and dividend policies) of firms that raise capital in inefficient securities markets and/or are led by irrational managers.