Behavioral finance

Research Paper

Ø Preliminary Guidance on the Research Assignment

The research paper is intended to encourage you to examine, in some depth, a subject matter in behavioral finance in which you are interested. It is also intended to introduce you to the body of research and development upon which current design practices are based.

It is designed to provide students with the opportunity to undertake an independent piece of work. This gives you the chance to think for yourself as a scholar. The topic or theme you choose is important here. Choose a topic or theme which engages your own interests, motivations and enthusiasms. Given the overall intentions of the course, there is here a strong emphasis on the development of research methods and skills.

So, how do you begin? The first week of the course is all about classical finance – why psychology might not matter in setting market prices. The second session onwards introduces you to anomalies that cannot be explained by classical finance. We also cover behavioral biases that individuals might have. Finally, we will cover why arbitrageurs cannot drive the market back to efficiency. The assignment is designed to get you thinking about what interests and motivates you through introducing the critical foundations of research methods. This will also help you frame. your research assignment.

For your research theme or topic, you may choose any aspect of the course content; OR, and this is encouraged, too, choose a topic which relates to another aspect of psychology and individual investor behavioral research that interests you. Framing areas of interest is important and will be part of seminar and tutorial discussions. However, each research assignment should include the following critical headings in terms of structure and organization (suggested word limits are in brackets):

1. Title – this should provide a sharp focus for your topic or theme

2. Abstract – this should be a summary of your argument (200 words)

3. Introduction – this leads the reader into your assignment, it should signpost or outline the main elements of work and your analysis (200-300 words)

4. Research Questions – these provide the narrow focus for your investigation, they often arise from your finding a ‘gap in the literature’ (300-400 words)

5. Literature Review – this provides a critical summary of published scholarly and research literature in articles, books, online, or in public policy (900-1000 words)

6. Research methods and Discussion – a summary of how you have undertaken your study (500-600 words)

7. Conclusion – this rounds off and draws together the different strands of your assignment (300-400 words)

Ø Scope of Paper

The number of words in the research paper about 2500 words, and you can propose to the instructor a topic of your own choice covering some part of the course. The subject should then be explored using at least three journal papers you identify through a quick screening of relevant literature on the topic. In your paper, you should attempt to describe the basic concepts and essential elements of the research area related to this topic, including some reference to experimental results (if applicable) and their implications to design.

Ø Format of Final Paper

The final report will including but not limited to the following components:

1. Title Page

2. Abstract Page

3. Introduction page

4. Main Text (sections and subsections)

5. Conclusion

6. List of References

7. Tables and Figures

Papers or books cited as references should be listed in the following format:

Name, Year, Title, Journal title/Book title, Volume No. (for papers), Issue No. (for papers) Publisher (for

books), Pages.

Example:

Cooper, Michael J., Orlin Dimitrov, and P. Raghavendra Rau, 2001, A rose.com by any other name, Journal of Finance 56, 2371-2388.

Sources of working papers in finance

www.ssrn.com is the largest repository of working papers in all areas of finance. I would suggest searching SSRN for examples of papers in behavioral finance, market anomalies, or other topics that involve investor behavior. As an example from China, see below:

"The Ghosts Lingering Around the Stock Market"

YI-HSI LEE, Soochow University
Email: [email protected]
DER-YUAN YANG, National Kaohsiung University of Science and Technology
Email: [email protected]
TIEQIANG LI, Central China Normal University
Email: [email protected]

Old traditions never die, neither do they simply fade away. Some are still deeply embedded in our mind. This paper examines two taboos in East Asia, four and ghost month, testing their potency on the stock markets. The results show that four has lost its mojo, while the ghost month impacts the stock market in the areas with such traditions. This effect may be seen in the marriage registrations also. By contrast, some of the menacing elements in the west seem to have evolved from inherently scary scenarios into explicitly joyful festivities due to the vicissitudes of time.