Behavioral Finance

Behavioral finance as a subdiscipline of behavioral economics is finance incorporating findings from psychology and sociology into its theories. Behavioral finance models are usually developed to explain investor behavior or market anomalies when rational models provide no sufficient explanations. To understand the research agenda, methodology, and contributions, this survey reviews traditional finance theory first. Then, this survey shows how modifications (e.g. incorporating market frictions) can rationally explain observed individual or market behavior. In the second section, the survey will explain the behavioral finance research methodology -how biases are modeled, incorporated into traditional finance theories, and tested empirically and experimentally- using one specific subset of the behavioral finance literature, the overconfidence literature.

Time Evolution of a Decaying Quantum State: Evaluation and Onset of Non-Exponential Decay

The method developed by Van Dijk, Nogami and Toyama for obtaining the time-evolved wave function of a decaying quantum system is generalized to potentials and initial wave functions of non-compact support. The long time asymptotic behavior is extracted and employed to predict the timescale for the onset of non-exponential decay. The method is illustrated with a Gaussian initial wave function leaking through Eckart's potential barrier on the halfline

On relativistic interaction of electric charges and external fields in quantum electrodynamics

The main subject of this thesis is the problem of introducing interactions into relativistic quantum mechanics. This problem has many facets, two of which will be discussed. The first one deals with a recent relativistically invariant integral equation for multi-time wave functions by Lienert. From a mathematical point of view this proposal is promising, since variants of it have been shown to be mathematically well-defined. In this thesis, firstly, previous results on existence and uniqueness of solutions of a variant of this equation for scalar particles are extended to include more realistic types of interaction. Secondly, a proof of existence and uniqueness of solutions of another variant that allows to treat spin 1/2 particles is provided. The second facet concerns interactions in the context of a variable number of particles. Following famous works of Dirac, Feynman and Schwinger, we treat external electrodynamic fields in an otherwise free Quantum Field Theory of electrons. In previous results, candidates for the time evolution operator have been constructed in this setting. This construction is unique up to a phase, which may depend on the external field. This phase affects the charge current density and should thus be identified. In this work, this problem is addressed by a geometric, which was inspired by and developed jointly with my supervisors, construction assuming a certain causality condition. Secondly, a compact formula for the scattering operator in terms of the corresponding one-particle scattering operator is provided and shown to be well-defined, assuming certain conditions on the external field. This formula is used to show that the second quantized scattering operator is an analytic function of the external field in a certain sense

Information Aggregation with Costly Information and Random Ordering: Experimental Evidence

The cost of information is an often ignored factor in economic situations although the information acquisition behavior of the decision makers has a crucial influence on the outcome. In this experiment, we study an information aggregation process in which participants decide in a random sequence. Participants observe predecessors decisions and can acquire additional private information at a fixed price. We analyze participants information acquisition behavior and updating procedures. About one half of the individuals act rationally, whereas the other participants systematically overestimate the private signal value. This leads to excessive signal acquisitions and reduced conformity.

Walking the Talk in Multiparty Bargaining: An Experimental Investigation

We study the framing effects of communication in multiparty bargaining. Communication has been shown to be more truthful and revealing than predicted in equilibrium. Because talk is preference-revealing, it may effectively frame bargaining around a logic of fairness or competition, moving parties on a path toward or away from equal-division agreements. These endogenous framing effects may outweigh any overall social utility effects due to the mere presence of communication. In two experiments, we find that non-binding talk of fairness within a three-party, complete-information game leads toward off-equilibrium, equal division payoffs, while non-binding talk focusing on competitive reasoning moves parties away from equal divisions. Our two studies allow us to demonstrate that spontaneous within-game dialogue and manipulated pre-game talk lead to the same results.communication, fairness, bargaining

Information Aggregation with Random Ordering: Cascades and Overconfidence

In economic models, it is usually assumed that agents aggregate their private and all available public information correctly and completely. In this experiment, we identify subjects' updating procedures and analyze the consequences for the aggregation process. Decisions can be based on private information with known quality and observed decisions of other participants. In this setting with random ordering, information cascades are observable and agents' overconfidence has a positive effect on avoiding a non-revealing aggregation process but it reduces welfare in general.