COURSE TITLE: Behavioral
Finance
UNITS OF CREDIT: 2
INSTRUCTOR: Terrance
Odean
E-MAIL ADDRESS: odean@haas.berkeley.edu
CLASS WEB PAGE LOCATION
(HTTP URL): http://faculty/haas.berkeley/edu/odean
MEETING DAY(S)/TIME:Tuesday,
1:00-4:00 PM
PREREQUISITE(S): MBA202,
MBA203
CLASS FORMAT: Lectures
REQUIRED READINGS:
Course reader and selected chapters from text.
BASIS FOR FINAL GRADE:
class participation, two short assignments, midterm, and final
ABSTRACT OF COURSE'S
CONTENT AND OBJECTIVES:
The course begins with
the study of heuristic and biases identified by behavioral decision theorists.
Topics will include overconfidence, attribution theory, the representative
heuristic, the availability heuristic, anchoring and adjustment, fairness,
hindsight bias, and prospect theory. We then discuss how these biases and
heuristics affect the behavior of managers and investors. Managers exaggerate
the degree to which they can control risk. They take an inside view of
projects resulting in optimistic forecasts, but conservativerisk aversedecisions.
Individual investors trade too much, hold onto losing investments too long,
and buy attention grabbing stocks. Finally, we examine behavioral theories
of market trading volume, limits of arbitrage, and asset price. The course
consists of lectures and several interactive demonstrations. Grading will
be based on class participation, two assignments, a midterm, and a final
exam.
BIOGRAPHICAL SKETCH:
Terrance Odean is an
Assistant Professor of Finance at the Haas School of Business at the University
of California, Berkeley. He earned a B.A. in Statistics at the University
of California, Berkeley in 1990 and a Ph.D. in Finance from the Haas School
of Business at the University of California, Berkeley in 1997. He taught
finance at UC Davis from 1997 through 2001. As an undergraduate at Berkeley,
Odean studied Judgment and Decision Making with Daniel Kahneman. This led
to his current research focus on how psychologically motivated decisions
affect investor welfare and securities prices.His
research has been cited in The Wall Street Journal, The New York Times,
The L.A. Times, The Washington Post, The International Herald Tribune,
Time, Newsweek, U.S. News and World Report, Barron's, Forbes, Business
Week, Smart Money, Bloomberg Personal, Worth, Kipplinger's Personal Finance,
and several other publications. While studying for his Ph.D., Odean worked
at Wells Fargo Nikko Investment Advisors and IRIS Financial Engineering,
and co-owned a seat on the Pacific Stock Exchange. During the summer of
1970, he drove a yellow cab in New York City.