Sumários
3.2. Prospective Theory
28 Março 2012, 18:00 • Margarida Abreu
Expected Utility Theory (EUT)
• Neoclassical economics
• Preferences and utility function
• EUT deals with risk
• Wealth outcomes
• Transitivity and completeness of preferences
• Properties of utility functions
• Risk aversion assumption
• Expected utility example
• Certainty equivalent
• Problems with EUT: Allais paradox
Alternative Theories
Prospect Theory (PT)
• Critic of expected utility theory
• Key aspects of decision-making
• The value function
• Weighting function
• Hypothetical Value and Weighting Function
• Riskless Loss Aversion
3. Heuristic and Behavioral Biases
21 Março 2012, 18:00 • Margarida Abreu
2.3. Representativeness
2.4. Belief Updating and combining effects
2.5. Biases stemming from a variety of factors
Overconfidence
3. Heuristic and Behavioral Biases
14 Março 2012, 18:00 • Margarida Abreu
1. Heuristic
• Rules of thumb
• Cognitive biases
• Common roots for most known judgment and decision biases
2. Heuristic simplification and Behavioral biases
2.1. Perception, memory, and processing
- salience and availability effects
- use of habits
- halo effects
- cue competition
- familiarity bias
2. Behavioral and Non-Behavioral Finance
7 Março 2012, 18:00 • Margarida Abreu
- Behavioral Finance versus Standard Finance (SF)
- Anomalies in Financial Markets that SF cannot explain
- Market Anomalies
• The Law of One Price and the closed-end fund puzzle
• Equity Premium Puzzle
- Investors' Anomalies
• The Winner's Curse
• Other Anomalies in Financial Literature
- BF departures from SF unrealistic assumptions about people
- I-New assumptions about preferences
- II - Heuristics and biases in judgment
- III - Lack of stable utility maximization
- IV - Other Departures:
• Caring About Changes
• Caring About Others
• Self Interest and Economics
• Caring About Now
- The foundations of BF and Important Contributors
- Critics: E. Fama