EC3601 Exam paper PDF

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Exam Question Paper

College/Institute

College of Business, Arts and Social Sciences

Department

Economics and Finance

Exam Author(s)

Matthew Rablen

Module Code

EC3601

Module Title

Behavioural Economics and Finance

Month Paper Type Duration

May

Year

2016

Final Exam 3 hours

Question Instructions ANSWER ONE QUESTION FROM SECTION A AND TWO QUESTIONS FROM SECTION B

Are Calculators Permitted?

Yes

Permitted Reference Materials

None

Required Stationery

None

SECTION A: 1. Briefly describe the key differences between prospect theory and expected utility theory. With reference to specific examples, evaluate the usefulness of these differences in explaining observed violations of expected utility theory. 2. “Government should pursue the goal of maximising gross domestic happiness rather than gross domestic product” Outline the Easterlin paradox. Critically evaluate its possible explanations, and its possible implications for economic policy in developed countries. SECTION B: 3. Explain what is meant by the equity premium puzzle. What are the possible explanations of this puzzle, and how well does each such explanation fit the empirical evidence? 4. Explain two anomalies in behavioural finance. For each, critically evaluate the usefulness of prospect theory in providing a possible explanation. 5. In what ways is the efficient market hypothesis violated in actual markets. What light, if any, can behavioural finance shed on the possible causes of these effects? 6. What is meant by the disposition effect? Critically discuss the possible explanations of this effect....