Akademik Veri Yönetim Sistemi
BEHAVIORAL FINANCE
Course Description
Behavioral finance argues that many facts about asset prices, investor behavior, and managerial behavior are best understood in models where at least some agents are not fully rational. This course will start by working through several survey articles that will give students a feel for the different strands of behavioral finance research.
We will meet each WEDNESDAY, 10:30am-13:30pm. Each week, I will assign relevant readings. These readings will consist of statistical background readings at times and specific papers about Behavioral Finance. You are expected to read much of the material before the class. The class will not follow a lecture format; rather, I will act as the discussion leader and background resource, especially as it comes to techniques or methodology.
Course Policies
Attendance. Attendance is mandatory at all regular class meetings. Exceptions for personal or family emergencies will be granted on a case-by-case basis.
Office hours
I will be available for office hours for 30 minutes after every class. If additional time is needed, please email me at muratkiy@istanbul.edu.tr
There is no textbook for this course. I will, however, form a packet of required readings which are listed in the outline below. This packet will be distributed to the students directly through the Department of Finance assistants or me. I will strive to make available as many of the supplemental (non-required) readings as possible.
Kıyılar, M ve Akkaya, M.; Davranışsal Finans; Literatür Yayınları, Yayın No: 747, Birinci Basım, Mart 2016 (ISBN: 978-975-04-0721-5)
Güngör, S ve Demirel, E.; Davranışsal Finansta Yatırımcı Önyargıları; Alfa Basım Yayım, 1. Basım, Aralık 2018 (ISBN: 978-605-171-899-6)
Barak, O.; Davranışsal Finans; Gazi Kitabevi, Ocak 2008 (ISBN: 978-9944-165-64-8)
Bostancı, F.; Davranışçı Finans; SPK Yayınları, Yayın No: 157, Ankara, Nisan 2003, (ISBN: 6951-60-5
Inefficient Markets: An Introduction to Behavioral Finance: Andrei Shleifer.
Advances in Behavioral Finance: Richard H. Thaler
Davranışsal Finans: Ekrem Tufan
Yatırımcı Psikolojisi: Serpil Döm
Readings
There will not be a coursepack for this course. I will send out an electronic version of the syllabus that will contain web links to most of the papers covered. Every week, I will send out an email that will have links to all of the papers covered. Students will be expected to print out these papers. They will never be asked to photocopy articles from a journal or book. Sometimes I will provide photocopies of the readings to be covered a couple of classes in advance. Throughout the semester, I will give out detailed lists of supplementary readings that the student can keep for future reference.
The topics covered in the course are divided into 16 sections, as outlined below.
1. Introduction and Efficient Markets Hypothesis
Jensen, Michael C. and Smith, Clifford W.,1984, The Theory of Corporate Finance: A Historical Overview. Michael C. Jensen, Clifford W. Smith, Jr., THE MODERN THEORY OF CORPORATE FINANCE, New York: McGraw-Hill Inc., pp. 2-20, Available at SSRN: http://ssrn.com/abstract=244161 or doi:10.2139/ssrn.244161
Jay R. Ritter, 2003, “Introduction to recent developments in corporate finance”, Recent Developments in Corporate Finance, Edward Elgar Publishers
Miller, Merton H., “Financial Innovation: The last Twenty Years and the Next”
Fama, E., 1970, "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance 25, 383-417.
Fama, E., 1991, "Efficient Capital Markets: II," Journal of Finance 46, 1575-1617.
Burton G. Malkiel; 2003, The Efficient Market Hypothesis and Its Critics, Journal of Economic Perspectives—Volume 17, Number 1—Winter 2003—Pages 59 – 82
2. Overview of Behavioral Finance
“A Survey of Behavioral Finance”. Nicholas Barberis, Richard Thaler. 2001. http://www.courses.fas.harvard.edu/~ec2728/Papers/Barberis_Thaler_2001.pdf There is a close correspondence between this survey and the syllabus that Prof. Barberis uses for his behavioral finance course at UChicago.
http://gsbwww.uchicago.edu/fac/nicholas.barberis/teaching/
“Behavioural Finance”; Martin Sewell, February 2007 (revised August 2008), Department of Computer Science University College London
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Another good reading list:
http://www.business.city.ac.uk/ferc//mark/teach/behavioural/behavioural2001.pdf
An excellent set of lecture notes on behavioral finance can be found at… http://frankschmid.com/bf.htm
David Hirshleifer. “Investor Psychology and Asset Pricing”. 2001.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=265132
Eugene Fama. Market Efficiency, Long-Term Returns, and Behavioral Finance.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=15108
Rubinstein, Mark (2001), “Rational Markets: Yes or No? The Affirmative Case,” Financial Analysts Journal (May-June), 15-29.
3. Limits to Arbitrage: Theory
Shleifer, Andrei, and Robert Vishny (1997), “The Limits of Arbitrage,” Journal of Finance 52, 35-55 [covered in Inefficient Markets, Ch .4]
F. Black, "Noise", Journal of Finance, vol. 41, pp. 529–543 (1986).
DeLong, J. Bradford, Andrei Shle ifer, Lawrence H. Summers, and Robert Waldmann, "Noise Trader Risk in Financial Markets," Journal of Political Economy 98, 703-738 [in Advances, Ch.2, also covered in Inefficient Markets, Ch.2.]
Lamont, Owen, and Richard Thaler (2003), “Can the Market Add and Subtract? Mispricing in Tech Stock Carve -Outs,” forthcoming, Journal of Political Economy [available on Lamont’s GSB web site]
Mitchell, Mark, Todd Pulvino, and Erik Stafford (2002), “Limited Arbitrage in Equity Markets,” Journal of Finance 57, 551-584 [available on Pulvino’s web site at the Kellogg School of Management].
Shleifer, Andrei (1986), “Do Demand Curves for Stocks Slope Down?,” Journal of Finance 41, 579-90.
Wurgler, Jeffrey, and Katya Zhuravskaya (2002), “Does Arbitrage Flatten Demand Curves for Stocks?,” Journal of Business 75, 583-608.
4. Short-Sale Constraints
“The Market for Borrowing Stock”. Gene D’Avolio.
http://www.courses.fas.harvard.edu/~ec2728/Papers/Davolio_2001.pdf
“The Expiry of IPO Share Lock-Ups”. 2001. Laura Field, Gordon Hanka.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=205011
5. Discussion of the Dotcom Bubble
“The Dotcom Bubble: The Rise and Fall of Internet Stock Prices”. Eli Ofek, Matt Richardson
http://www.courses.fas.harvard.edu/~ec2728/Papers/Ofek_Richardson_2002.pdf
6. Agency Problems in Investment Management. Hedge Fund Performance
“How the Eggheads Cracked” Michael Lewis
http://www.magnum.com/hedgefunds/articles/1999/990124hfprint.asp
Related Material:
“On Taking the ‘Alternative’ Route: Risks, Rewards, Style, and Performance Persistence of Hedge Funds”. Vikas Agarwal, Narayan Naik.
http://papers.ssrn.com/sol3/delivery.cfm/99022311.pdf?abstract_id=150388
A Powerpoint presentation on this paper is available at… http://mba.vanderbilt.edu/fmrc/Activity/Conference%20Presentations/Agarwalvanderbilt%20apr2002.ppt
“Offshore Hedge Funds: Survival and Performance 1989-1995”. Steven Brown, William Goetzman, Roger Ibbotson. http://papers.nber.org/papers/W5909
7. IPOs
“A Review of IPO Activity, Pricing, and Allocations”. 2002. Jay Ritter, Ivo Welch http://papers.ssrn.com/sol3/papers.cfm?abstract_id=296393
8. Khaneman and Tversky
Kahneman, Daniel, and Amos Tversky (1974), “Judgment Under Uncertainty: Heuristics and Biases,” Science 185, 1124-31.
Kahneman, Daniel, and Amos Tversky (1979), “Prospect Theory: An Analysis of Decision Under Risk,” Econometrica 47, 263-91.
Kahneman, Daniel, and Mark Riepe (1998), “Aspects of Investor Psychology,” Journal of Portfolio Management 24, 52-65.
9. Investor Psychology
Benartzi, Shlomo, and Richard Thaler (1995), “Myopic Loss Aversion and the Equity Premium Puzzle,” Quarterly Journal of Economics 110, 75-92.
Thaler, Richard, and Eric Johnson (1985), “Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice,” Management Science 36, 643-660.
10. Overreaction and Momentum
Jegadeesh, Narasimhan and Sheridan Titman (1993), “Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency,” Journal of Finance 48, 65-91.
De Bondt, Werner, and Richard Thaler (1985), “Does the Stock Market Overreact?,” Journal of Finance 40, 793-808 [in Advances, Ch.9].
11. Shleifer vs. Fama
Lakonishok, Josef, Andrei Shleifer, and Robert W. Vishny (1994), “Contrarian Investment, Extrapolation, and Risk,” Journal of Finance 49, 1541-1578.
Barberis, Nicholas, Andrei Shleifer, and Robert Vishny (1998), “A Model of Investor Sentiment,” Journal of Financial Economics 49, 307- 345 [in Inefficient Markets, Ch.5].
Fama, Eugene F. (1998), “Market Efficiency, Long-Term Returns, and Behavioral Finance,” Journal of Financial Economics 49, 283-307.
12. Investor Behavior and Behavioral Corporate Finance
Barber, Brad, and Terrance Odean (2000), “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors,” Journal of Finance 55, 773-806 [available on Odean’s UC Berkeley web site].
Barber, Brad, and Terrance Odean (2002), “Online Investors: Do the Slow Die First?,” Review of Financial Studies 15, 455-487.
Barber, Brad, and Terrance Odean (2001), “All that Glitters: the Effect of Attention on the Buying Behavior of Individual and Institutional Investors,” Working paper, UC Berkeley [available on Odean’s UC Berkeley web site].
Grinblatt, Mark and Bin Han (2002), “The Disposition Effect and Momentum,” Working paper, Anderson School, UCLA.
Odean, Terrance (1998), “Are Investors Reluctant to Realize their Losses,” Journal of Finance 53, 1775-1798.
Odean, Terrance (1998), “Do Investors Trade Too Much?,” American Economic Review 89, 1279-1298.
Baker, Malcolm, Jeremy Stein, and Jeffrey Wurgler (2001), “When Does the Market Matter? Stock Prices and the Investment of Equity- Dependent Firms,” forthcoming, Quarterly Journal of Economics [available on Wurgler’s web site at NYU].
Baker, Malc olm, and Jeffrey Wurgler (2000), “The Equity Share in New Issues and Aggregate Stock Returns,” Journal of Finance 55, 2219-2257.
Baker, Malcolm, and Jeffrey Wurgler (2002), “Market Timing and Capital Structure,” Journal of Finance 57, 1-32 [available on Wurgler’s web site at NYU].
Baker, Malcolm, and Jeffrey Wurgler (2002), “A Catering Theory of Dividends,” Working paper, NYU [available on Wurgler’s web site at NYU].
Morck, Randall, Andrei Shleifer, and Robert Vishny (1993), “The Stock Market and Investment: Is the Market a Sideshow?,” Brookings Papers on Economic Activity.
Shleifer, Andrei, and Robert Vishny (2003), “Stock Market Driven Acquisitions,” forthcoming, Journal of Financial Economics.
13. Short-selling and Returns
Hong, Harrison, and Jeremy Stein (1999), “Differences of Opinion, Short-sales Constraints and Market Crashes,” forthcoming, Review of Financial Studies.
Jones, Charles, and Owen Lamont (2001), “Short Sale Constraints and Stock Returns,” Journal of Financial Economics 66, 207-239 [available on Lamont’s GSB web site].
Miller, Edward (1977), “Risk, Uncertainty and Divergence of Opinion,” Journal of Finance 32, 1151-1168.
14. Value vs. Growth
Fama, Eugene F. and Kenneth R. French (1992), “The Cross-Section of Expected Stock Returns,” Journal of Finance 47, 427-465.
“Earnings Surprises, Growth Expectations, and Stock Returns: Don’t Let an Earnings Torpedo Sink Your Portfolio”. Douglas Skinner, Richard Sloan.