BEHAVIORAL ECONOMICS AND FINANCE
TRAINING OBJECTIVES
The course, as a related and integrative training activity, contributes to the achievement of the educational objectives by providing theoretical and methodological tools useful to analyze, interpret and evaluate human behavior in the economic-business context at an individual (individual decision-making), micro (small groups) and macro level (complex organizational systems). In particular, the course integrates knowledge on traditional economic and financial theories, which presuppose the unlimited rationality of the decision maker, with the most recent evidence of psychological research on decision-making processes in conditions of risk, uncertainty and ambiguity. In addition, the course aims to provide knowledge and useful tools to be able to carry out, in full autonomy and / or in collaboration with other professional figures, actions aimed at developing human potential, managing innovation in social, institutional and productive contexts.
D1
At the end of the course, students should know and understand features related to Economics and Behavioral Finance in order to be able to apply the latest cognitive and behavioral models to the economic and financial environment. In particular, students:
- must have acquired specialist knowledge relating to the main reference literature;
- will have to know the main empirical evidence that led to the affirmation and development of the discipline.
D2
At the end of the course, the student must be able to apply and integrate the theoretical and metholodogical knowledge learned to specific contexts, through the creation of ad hoc research protocols and / or through the formulation or revision of real case studies.
The course presents the contribution to the "orthodox" economic and financial theory obtained through the "behavioural" approach. In this perspective, the following topics will be covered: a) Empirical evidence on market efficiency; b) Factors influencing markets; c) Decision making and bisystemic theory; d) Heuristics and bias; e) Excessive security; f) Value theory and choices; g) Mental accounting and self-control; h) Nudging; i) Decisions under uncertain conditions.
- The "ortodox" economic and financial theory (hints)
- Empirical evidence on market efficiency.
- Decision making and bisystemic theory
o Attention and effort
o The associative mechanism
o Cognitive fluidity
o Standards, surprises and causes
o A mechanism to jump to conclusions
o How judgments are formed
o Answer an easier question
- Heuristics and biases
o The law of small numbers
o Anchors
o The science of availability
o Availability, emotion and risk
o Conjunction fallacy
o Less is more
o Stereotypes
o Regression towards the average
- Excessive security
o The illusion of understanding
o The illusion of validity
o Intuitions against formulas
o Expert intuition
o External vision
o Optimism
- Value Theory and Choices
o Bernoulli's theory
o The Prospect Theory
o The endowment effect
o Negative events
o The 4-cell scheme
o Rare events
o Risk policies
o Reversals
o Frame and reality
- The two selves
- Mental accounting and self-control
- Nudging
- Decisions and uncertainty.
recommended readings:
• D. Kahneman, Thinking Fast and Slow, Farrar, Straus and Giroux, 2011.
• R. Thaler, Misbehaving: The Making of Behavioral Economics, 2015.
• R. J. Shiller, Irrational Exuberance, Crown Pub, 2006.
• G. Gigerenzer, Risk Savvy: How To Make Good Decisions, Allen Lane, 2014.
Lectures; Discussion of scientific articles and participation in laboratory activities for experiments in economics and behavioral finance.
The preparation of the students will be verified by means of an interview. The final grade will be expressed in thirtieths.
The subjects to be examined will reflect those covered during the course of teaching and present in the programme.