Throughout the course of this semester, we?ll be studying models of managing (and pricing) risk that are based largely upon the assumptions that 1) human behavior is ?rational? and that 2) markets are informationally efficient. These assumptions have recently come under attack in the academic and in the public policy arenas; the most challenging intellectual attack has come from proponents of so-called ?behavioral finance?. Anyway, the NOVA program entitled ?Mind over Money? (embedded below at the end of this blog posting) does an excellent job of summarizing as well as comparing and contrasting the rational, efficient markets approach upon which this course is based and the behavioral finance approach.
In the interest of promoting better appreciation and understanding of these ideas, I have decide to offer the following extra credit opportunity for Finance 4335. You can earn extra credit by watching this ?Mind over Money? and writing a succinct (1-2 page) ?executive summary? in which you summarize what you learned from the program and also give me your opinion concerning the relative merits (as well as shortcomings) of these two approaches. Email your report (in either Microsoft Word or Adobe Acrobat format) to risk@garven.com by no later than the Monday, October 8 at 5 p.m. I will use your grade on this assignment to replace your lowest quiz grade in Finance 4335 (assuming that your grade on the extra credit is higher than your lowest quiz grade). If you have any questions about this extra credit opportunity, please let me know by emailing me at James_Garven@baylor.edu or calling me at 254-307-1317.
Watch Mind Over Money on PBS. See more from NOVA.
Source: http://risk.garven.com/2012/09/30/mind-over-money-can-markets-be-rational-if-humans-arent/
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