PSYCHOLOGY AND ECONOMICS USING EXPERIMENTAL METHODS

AIms of the course

providing summer school participants with in-depth knowledge and broadenig their intuition of the impact of psychological factors and various behavioral phenomena on decision making process and behavior of market participants,
preparing participants to observe how psychological factors and behavioral phenomena affect the movement of prices, returns and trading volume at the market, as well as the investment, capital structure and dividend decisions of a company,
supporting participants to apply gained behavioral knowledge in financial management and investment decisions,
learning participants how to make good experimental design,
classic economic theories, practices and models will be enriched by concepts such as limited rationality, limited arbitrage, time discounting, self-control, as well as different judgement biases and heuristics.

From Traditional to Behavioral Finance: reviewing the sustainability of the hypotheses and assumptions of traditional finance
Heuristics and Biases
Prospect Theory and Cumulative Prospect Theory
Limited Arbitrage and Belief Heterogeneity
Behavioral Corporate Finance
Time Discounting, Time Preference and Intertemporal Choice Theory
Economic experiment as a methodology of behavioral finance
Experiment about Quasi-Hyperbolic Discounting
Asset Price Bubbles – Theoretical Approach and Practical Class in Experimental Lab
Impact Investing – Theoretical Approach and Practical Class in Experimental Lab
Propensity score methods – Nonrandomised (observational) studies

Upon completion of the course it is expected that the student is able:

to interpret decisions of market participants who are not perfectly rational, use heuristics in a wrong way and manifest biases in decision-making,
to explain how two decision-making systems, heuristic and expert one, function and interact in decision-making process,
to analyse the impacts of behavioral phenomena on firm’s investment and dividend policy, its capital structure, M&А transactions and corporate governance,
to apply basic principles of the design of economic experiment,
to apply propensity score methods in order to mitigate confounding bias when estimating causal effects in observational studies.