This class exists in these courses :
• IÉSEG > IESEG Degree - Programme Grande École > Semester 1 > 2,00 ECTS

Prerequisites

Courses: Corporate Finance. Basic knowledge of Utility Theory and Probability
Theory.
Software: Knowledge of statistical analysis using Excel spreadsheet (or, Eviews,
Stata, R, …) will significantly reduce the estimated personal workload for this course.

Learning outcomes

The traditional finance paradigm is based on models in which agents (investors and
managers) are rational and that perfect arbitrage leads to optimal valuation of assets.
However, this pardigm is found to be insufficient in explaining « anomalies », such as
the compnay’s payout policy, Initial Public Oferring underpricing, short-term Mergers
& Acquisition synergies and stock price bubbles. In this course, we extend the
traditional financial-models with behavioral models to explain some well-known
stylized facts in finance. At the end of the course, the students will have learnt how to
empirically validate behavioral models.

Course description

1. Psychology (Prospect Theory) and Limites to Arbitrage
2. Initial Public Offerings (underpricing),
3. Mergers & Acquisitions (short-term synergies),
4. Capital Structure (catering to demand for dividends).

Class type

Class structure

Teaching methods

• E-learning
• Presentation
• Project work
• Research

Assessment

Final exam (25%). Group project + presentation + discussions (75%)

Recommended reading

• Required reading material and lecture notes are posted on the course website. - NA

  Required reading material and lecture notes are posted on the course website.

Internet resources

• IESEG Online

  The required course material is on the course website. Please check course website regulalry for discussions on the project.

• www.behaviouralfinance.net

  www.behaviouralfinance.net