Behavioural Finance and Economics

I. This summative assignment has two assessment tasks. You must complete both task 1 and task 2. Each task is worth 50 marks.

II. For task 1, download and extract BFE_Takeaway.zip. You must use dataXY.dta where XY refers to the last two digits of your anonymous exam code. For example, if anonymous code is Z0912345, you must use data45.dta. Each data file is in Stata format, and has been simulated using BFE_Sect2.dta (i.e. the data file that you analysed in your computer practical) as a basis. All variable names and definitions are identical to the source data.

III. In task 2, Barberis, Mukherjee and Wang [2016] refers to the following article: Barberis N, Mukherjee A and Wang B. 2016. Prospect Theory and Stock Returns: An Empirical Test. Review of Financial Studies 29: 3068-3107. [Link]

IV. Your assignment must include a code appendix that reports all computer codes that have been used to generate your output for task 1. The code appendix DOES NOT count towards your overall word limit. Failure to include the code appendix may result in a loss of marks awarded to task 1.

Assessment Tasks

Task 1: There are well-known models in finance which assume that the decision maker is an expected utility maximiser with a CARA utility function. Propose structural econometric models which can be used to test this assumption, and use your allocated data file to estimate at least two of the proposed models. Report the estimation results in a format that is suitable for academic journals, and discuss your findings.

Task 2: Critically evaluate the construction and use of variable TK in Barberis, Mukherjee and Wang [2016]. You must cite appropriate studies to support your discussion.

Overall word limit, 2500 words maximum.

The word count should:
• Include all the text, including title, preface, introduction, in-text citations, quotations, footnotes and any other item not specifically excluded below.
• Exclude diagrams, tables (including tables/lists of contents and figures), equations, executive summary/abstract, acknowledgements, declaration, bibliography/list of references and appendices. However, it is not appropriate to use diagrams or tables merely as a way of circumventing the word limit. If a student uses a table or figure as a means of presenting his/her own words, then this is included in the word count.

Examiners will stop reading once the word limit has been reached, and work beyond this point will not be assessed. Checks of word counts will be carried out on submitted work, including any assignments or dissertations/business projects that appear to be clearly over- length. Checks may take place manually and/or with the aid of the word count provided via an electronic submission. Where a student has intentionally misrepresented their word count, the School may treat this as an offence under Section IV of the General Regulations of the University. Extreme cases may be viewed as dishonest practice under Section IV, 5
(a) (x) of the General Regulations.

Very occasionally it may be appropriate to present, in an appendix, material which does not properly belong in the main body of the assessment but which some students wish to provide for the sake of completeness. Any appendices will not have a role in the assessment
– examiners are under no obligation to read appendices and they do not form part of the word count. Material that students wish to be assessed should always be included in the main body of the text.

MARKING GUIDELINES
Performance in the summative assessment for this module is judged against the following criteria:
• Relevance to question
• Organisation, structure and presentation
• Depth of understanding
• Analysis and discussion
• Use of sources and referencing

• Overall conclusions

Students are strongly advised to use Arial font size 11 for their assignments. A template assignment is provided for students and it is recommended for students to use this.

You must submit an electronic copy of your assignment on DUO which will be put through the plagiarism detection service.

The electronic version of the assignment which you submit on-line should INCLUDE all appendices and any extracts from the companies’ financial statements.

Sample Solution

ACED ESSAYS