ECON 252: Financial Markets
Lecture 07 - Behavioral Finance: The Role of Psychology. 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. (from oyc.yale.edu)
| Lecture 07 - Behavioral Finance: The Role of Psychology |
| Time | Lecture Chapters |
| [00:00:00] | 1. What Is Behavioral Finance? |
| [00:09:01] | 2. Market Volatility: Random, or Socially Influenced? A Present Value Analysis |
| [00:19:58] | 3. Overconfidence: Its Ubiquity and Impact on Financial Markets |
| [00:38:29] | 4. The Kahneman and Tversky Prospect Theory or, How People Make Choices |
| [00:58:50] | 5. The Regret Theory and Fashion as a Measure of the Market |
| References |
| Lecture 7 - Behavioral Finance: The Role of Psychology Instructor: Professor Robert J. Shiller. Resources: Lecture 7 [PDF]; Problem Set 3: Stock Market Forecasting Exercise [PDF]. Transcript [html]. Audio [mp3]. Download Video [mov]. |
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