Outline for the Course in Experimental and Neuro- Finance Elena Asparouhova and Peter Bossaerts Week 1 Wednesday, July 25, Elena Asparouhova CAPM in the laboratory. A simple experiment. Intro do flexe-markets (web-based software for designing market experiments). One-period markets: the experimental evidence. 1. Basic Principles of Asset Pricing Theory: Evidence from Large-Scale Experimental Financial Markets, Bossaerts, P. and C. Plott, Review of Finance 2004. 2. Prices and Portfolio Choices in Financial Markets: Theory, Econometrics, Experiments, Bossaerts, P., Plott, C. and B. Zame, Econometrica 2007. 3. Excess Demand and Equilibration in Multi-Security Financial Markets: The Empirical Evidence, Asparouhova E., Bossaerts, P., and C. Plott, Journal of Financial Markets 2003. Friday, July 25/6, Peter Bossaerts Basic principles of neurophysiology Imaging techniques - single-unit neural recording, fmri, EEG (scalp and intracranial) and MEG. Basics of Pharmacology. 1. Brain Facts: A Primer on the Brain and the Nervous System, Society of Neuroscience. 2. The General Linear Model and Statistical Parametric Mapping, Kiebel, S. and A. Holmes.
3. Modulators of Decision Making, K. Doya. Week 2 Monday, July 30, Peter Bossaerts Neural encoding of expected reward and risk Reward and risk prediction errors 1. Adaptive Coding of Reward Value by Dopamine Neurons, Tobler, P. N, Fiorillo, C. D., and W. Schultz 2. Temporal Difference Models and Reward-Related Learning in the Human Brain, O Doherty J. et al. 3. Human Insula Activation Reflects Risk Prediction Errors As Well As Risk, Preuschoff K., Quartz, S. R. and P. Bossaerts. 4. Pupil dilation signals surprise: Evidence for noradrenaline s role in decision making, Preuschoff, K. et al. Wednesday, August 1, Elena Asparouhova Infinite horizon economy the Lucas model and the experimental evidence. Reading: 1. Asset Prices in an Exchange Economy, Lucas R., Econometrica 2003. 2. Experiments with the Lucas Asset Pricing Model, Asparouhova, E., Bossaerts, P., Roy, N., and W. Zame, working paper 2012 3. The Role of Securities in the Optimal Allocation of Riskbearing, K. J. Arrow. 4. Existence of Equilibrium of Plans, Prices, and Price Expectations in a Sequence of Markets, Radner, R. 5. Implementing Arrow-Debreu Equilibria by Continuous
Trading of Few Long Lived Securities, Duffie, D. and Chi-Fu Huang. Friday August 3 Elena Asparouhova Markets for contracts. Insurance and delegation. 1. Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information, Rothschild, M. and J. Stiglitz, The Quarterly Journal of Economics 1976. 2. Competition in Lending: Theory and Experiments, Asparouhova, E., Review of Finance 2006. 3. Competition in Portfolio Management: Theory and Experiment, Asparouhova, E., Bossaerts, P., Copic, J., Cvitanic, J., Meloso, D. Week 3 Monday, August 6, Peter Bossaerts Bayesian learning and the human brain. Different Types of Uncertainty. 1. Learning the value of information in an uncertain world, Behrens, T. et al. 2. The Role of the Ventromedial Prefrontal Cortex in Abstract State-Based Inference during Decision Making in Humans, Hampton, A. N., Bossaerts, P., and O Doherty J. P. 3. Uncertainty, Neuromodulation, and Attention, Yu, A. J. and P. Dayan. 4. Learning and Generalization under Ambiguity: An fmri Study, Chumbley, J. R. et al.
5. Exploring the Nature of Trader Intuition, Bruguier, A. J., Quartz, S. R. and P. Bossaerts. Wednesday, August 8, Elena Asparouhova Credit market bubbles. Individual and Social Rationality. 1. Market Bubbles and Crashes as an Expression of Tension between Social and Individual Rationality: Experiments, Asparouhova, E., Tran, A., and P. Bossaerts. 2. On the Severity of Bank Runs: An Experimental Study, Schotter, A., and T. Yorulmazer. 3. Checkmate: Exploring Backward Induction Among Chess Players, Levitt, S., List J. A., and S. E. Sadoff. Friday, August 10, Peter Bossaerts Neurobiological foundations of strategic uncertainty and the link with theory of mind 1. Imaging the Intentional Stance in a Competitive Game, Gallagher, H. L. et al. 2. Neural Mechanisms of Belief Inference during Cooperative Games, Yoshida, W. et al. 3. Cooperation and Heterogeneity of the Autistic Mind, Yoshida, W. et al. 4. The Rupture and Repair of Cooperation in Borderline Personality Disorder, King-Casas, B. et al. 5. Neural correlates of mentalizing related computations during strategic interactions in humans, Hampton, A., Bossaerts, P., and J. O Doherty.
Week 4 Monday August 13 Last class, both Peter Bossaerts and Elena Asparouhova Finishing up all that was left behind from previous lectures