We will use popular and accepted theories of human behavior from the fields of psychology and decision-making to characterize some prevalent features of irrational behavior in the financial markets. We will discuss typical errors made by financial market participants as a result of behavioral biases, and examine the extent to which irrationality can affect financial markets at the aggregate level (bubbles), how long irrationality may persist, and what factors will eventually cause these bubbles to burst (crashes). Prerequisite: Economics 201D. Instructor consent required.
Economics Department