Behavioral Finance: A Taxonomy of Money Mistakes

Uses popular and accepted theories of human behavior from the fields of psychology and decision-making to characterize some prevalent features of irrational behavior in financial markets. Includes discussion of typical errors made by financial market participants as a result of behavioral biases, and examination of 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. Seniors only.