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LECTURE 10: REVISIONI will be responding to some questions that I have received by email.
• All the lectures are included in your exam.
• The exam is in English (questions and answers)
• The exam has 2 parts:
1. 20-25 Multiple choice questions (60% of the total mark)
2. 2 essay questions (40% of the total mark)
EXAMPLES
For multiple choice examples :
• Online resources related to the book (multiple choice examples) :
• https://routledgetextbooks.com/textbooks/9781138097124/quiz.php
• Book: Behavioral Economics. Edward Cartwright 2018 (online access through thelibrary)
• Detailed table of content of the book in Ufora(File lecture 9 à table of content_book)
Essay question example:
Explain how prospect theory can bring an answer to the equity premium puzzle?
1. Form of answer: structured paragraph, you can use graphs to illustrate your answer.
2. The answer should include:
• Definition of the equity premium puzzle (EPP)
• Define and introduce prospect theory, highlighting the feature / element of prospect theory that can explain the EPP:
loss aversion
• It is very likely that a stock shows some decline over a short time horizon, which may then trigger loss aversion. People
tend to be loss averse and myopic. So, investors will focus on short term intervals to evaluate losses. Myopic loss averse
agents will then not invest/reduce investments in stocks.
This topic was seen in lecture 3
TOPICS
1. General introduction, Standard economic model: Expected utility, expected value
2. Heuristics and expected utility paradoxes
3. Time preferences, present bias, and applications
4. Decision making under risk. Prospect Theory (features and some applications)
5. Interaction and social preferences, applications
6. Behavioural insights and nudge
7. Research in Behavioural Economics
QUESTIONS
Q: Do we have to know the concepts or the concepts with the specific applications and examples (I do not really
understand whether the applications and examples are informative, or do we have to study and know them for the
exam)?
A: Yes, you have to know the applications that we saw in the course. Looking at the original papers is
optional/recommended.
Q: Do we need to calculate probabilities and EU or do we only need to understand the meaning?
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