Behavioral Finance

1. Behavioral Finance Economics 437

2. Anomalies (popular books) • “Money Ball” by Michael Lewis • “Scorecasting” by Tobias Moskowitz and Jon Wertheim • “Thinking: Fast and Slow” by Daniel Kahneman • “The Undoing Project” by Michael Lewis

3. Psychology Research (Collection of articles compiled in books) • “Judgment Under Uncertainty: Heuristics and Biases,” by Daniel Kahneman, Paul Slovic, and Amos Tversky • “Choices, Values & Frames,” Edited by Daniel Kahneman and Amos Tversky

4. Engineers and Lawyers • 70/30 and 30/70 • “Dick is a 30 year old man. He is married with no children. A man of high ability and high motivation. He promises to be quite successful in his field. He is well liked by his colleagues.” • Is he an engineer or a lawyer?

5. Steve is very shy and withdrawn, invariably helpful, but with little interest in people, or in the world of a reality • Is Steve? • Farmer • Salesman • Airline Pilot • Librarian • Physician

6. Hmmm? • We are in a room of 70 engineers and 30 lawyers • Bill is a 30 year old man. He is married with no children. A man of high ability and high motivation, he promises to be quite successful in his field. He is well liked by his colleagues • Is Bill more likely to be a lawyer or an engineer?

7. Representativeness • Less is more • RGRRR • GRGRRR • GRRRRR

8. Here’s an easy one • Two hospitals, large one, small one • 45 babies born each day in large hospital • 15 babies born each day in small hospital • On average, 50 % of babies are male • Over the course of a year, which has hospital has more days when 60% or more babies born are male? The large one or the small one?

9. The End