Behavioral Finance And Asset Pricing at Humboldt-Universität Zu Berlin | Flashcards & Summaries

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Lernmaterialien für Behavioral Finance and Asset Pricing an der Humboldt-Universität zu Berlin

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TESTE DEIN WISSEN

Investor Rationality according to finance lecture (2 Assumptions)

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TESTE DEIN WISSEN

1. Investors update beliefs with Bayes Rule

2. Investors choices are consistent with SEU

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TESTE DEIN WISSEN

What is the source of return predictability in efficient markets with risk averse investors?

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TESTE DEIN WISSEN
  • risk premium 
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TESTE DEIN WISSEN

Momentum 

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TESTE DEIN WISSEN
  • medium horizon continuation
  • stock that performed well(poorly) in last 3-12 mo. will continue to do so for the next 3-12mo.
Lösung ausblenden
TESTE DEIN WISSEN

What are corporate insiders?

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TESTE DEIN WISSEN
  • members of the board
  • owners of more than 10% of the stock of a company
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Tax Selling Hypothesis (JE)

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TESTE DEIN WISSEN
  • before year end investors realize losses to cut back on cap gains tax( prices fall)
  • investors reinvest in January (prices rise)
  • mixed empirical evidence
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TESTE DEIN WISSEN

Joint hypothesis problem

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TESTE DEIN WISSEN

H1: the markets are informationally efficient 

H2: the model used to estimate risk-adj. returns is correct


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TESTE DEIN WISSEN

3 Forms of EMH

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TESTE DEIN WISSEN

weak: no profits from past information

semi-strong: no profits from publicly available information

strong: no profits from private/insider information 

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TESTE DEIN WISSEN

Why do security prices follow random walks if investors are risk neutral?

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TESTE DEIN WISSEN
  • prices on basis of value relevant news
  • news are random
  • prices are random
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TESTE DEIN WISSEN

Widely accepted model of rational choice and its 3 tenets?

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TESTE DEIN WISSEN

Expected Utility Theory


Tenets

  1. Utility of a prospect is the utility of its outcomes
  2. a prospect is acceptable if the utility resulting from its integration with ones assets exceeds the utility of those assets
  3. risk aversion(u" < 0)


EU focuses on final wealth rather than gains and losses

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TESTE DEIN WISSEN

Define Arbitrage

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TESTE DEIN WISSEN

Simultaneous buying and selling of a security or a substitute at advantageously different prices.

Lösung ausblenden
TESTE DEIN WISSEN

Model of Portfolio Choice, CAPM Assumptions 

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TESTE DEIN WISSEN
  • Investors are risk-averse
  • Investor choose mean-variance-efficient portfolios 
  • homogenous expectations
  • unrestricted borrowing and lending at risk free rate

 

Lösung ausblenden
TESTE DEIN WISSEN

What are the limits to arbitrage?

Lösung anzeigen
TESTE DEIN WISSEN
  1. Fundamental Risk
  2. Noise trader risk
  3. Implementation costs
Lösung ausblenden
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Beispielhafte Karteikarten für deinen Behavioral Finance and Asset Pricing Kurs an der Humboldt-Universität zu Berlin - von Kommilitonen auf StudySmarter erstellt!

Q:

Investor Rationality according to finance lecture (2 Assumptions)

A:

1. Investors update beliefs with Bayes Rule

2. Investors choices are consistent with SEU

Q:

What is the source of return predictability in efficient markets with risk averse investors?

A:
  • risk premium 
Q:

Momentum 

A:
  • medium horizon continuation
  • stock that performed well(poorly) in last 3-12 mo. will continue to do so for the next 3-12mo.
Q:

What are corporate insiders?

A:
  • members of the board
  • owners of more than 10% of the stock of a company
Q:

Tax Selling Hypothesis (JE)

A:
  • before year end investors realize losses to cut back on cap gains tax( prices fall)
  • investors reinvest in January (prices rise)
  • mixed empirical evidence
Mehr Karteikarten anzeigen
Q:

Joint hypothesis problem

A:

H1: the markets are informationally efficient 

H2: the model used to estimate risk-adj. returns is correct


Q:

3 Forms of EMH

A:

weak: no profits from past information

semi-strong: no profits from publicly available information

strong: no profits from private/insider information 

Q:

Why do security prices follow random walks if investors are risk neutral?

A:
  • prices on basis of value relevant news
  • news are random
  • prices are random
Q:

Widely accepted model of rational choice and its 3 tenets?

A:

Expected Utility Theory


Tenets

  1. Utility of a prospect is the utility of its outcomes
  2. a prospect is acceptable if the utility resulting from its integration with ones assets exceeds the utility of those assets
  3. risk aversion(u" < 0)


EU focuses on final wealth rather than gains and losses

Q:

Define Arbitrage

A:

Simultaneous buying and selling of a security or a substitute at advantageously different prices.

Q:

Model of Portfolio Choice, CAPM Assumptions 

A:
  • Investors are risk-averse
  • Investor choose mean-variance-efficient portfolios 
  • homogenous expectations
  • unrestricted borrowing and lending at risk free rate

 

Q:

What are the limits to arbitrage?

A:
  1. Fundamental Risk
  2. Noise trader risk
  3. Implementation costs
Behavioral Finance and Asset Pricing

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