Relevant information, lecture links and downloads will be made available via Moodle.

Behavioral Finance explains financial phenomena by agents who are bounded rational. It consists of two building blocks: the limits to arbitrage and investor psychology. The aim of this lecture is to give students an overview over the field of behavioral finance. At the end of the semester students should know under which conditions arbitrage does not work, how behavioral patterns guide agents' investment decisions, when herd behavior occurs and what implications bounded rationality has for market outcomes.

• Informational Efficiency versus Behavioral Finance
• The Revelation of Private Information Through Trading
• The Limits to Arbitrage
• Herd Behavior: Informational Externalities
• Herd Behavior: Payoff-Externalities and Bank Runs
• Herd Behavior: Reputational Herding
• Experimental Evidence on Herding Behavior
• Investor Psychology

The literature for each session is provided via Moodle.