1. The purpose of this question is to encourage creative exploration outside the classroom. Keep your eyes and ears open for unique examples of behavioral finance concepts in everyday life, in the media,etc. Your item could be a video, comic, photo, anecdote, or other unique item you encounter, and it must come from an existing non-course source that you fully credit (with reference to an author, photographer, book, magazine article, newspaper story, URL, etc.). The item you identify must not come from course resources, such as lectures or readings. Be sure the example you identify relates to a financial context. The example you hand in must be unique (i.e., not the same as a classmate’s) and it must demonstrate a behavioral finance concept effectively (and optionally humorously). Be sure you explain exactly how the item demonstrates a particular concept. That is, what is the behavioral concept (be sure to use course terminology), and how does the item demonstrate the concept effectively in the context of finance? 2. Explain the difference between the terms/concepts in each of the following pairs of terms/concepts. Your explanation should include definitions of the terms/concepts. a. Momentum versus reversal b. Value stocks versus growth stocks 3. Recall the scenario discussed in class where individuals are asked to make choices between smaller, earlier amounts versus larger, later amounts. a. When asked to choose between receiving $10,000 today versus $10,001 tomorrow, which do most people choose? b. When asked to choose between receiving $10,000 a year from today versus $10,001 a year plus one day from today, which do most people choose? c. What is the name of this tendency? d. Explain how the Save More Tomorrow program uses this tendency. e. Discuss a benefit and a downside of a retirement plan that automatically signs up employees to contribute 2% of their earnings each year. Assume this plan has all the features of a “good” nudge.
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