Demonstrate competency in the behavioral finance you are required to complete the following learning demonstration.

1. Executive summary

2) A numeric example demonstrating violations of expected utility theory,

3) Description of the value function,

4) Implications of prospect theory (or behavioral finance) for the efficient market hypothesis, and

5) An example of an anomaly that could be explained by prospect theory.

3. Bias identification a. Select the behavioral finance concept best exhibited in each of your colleagues’ three statements at jojo’s bar. Explain how the behavioral finance concept you selected affects her investment decision making. Write your responses to these issues raised by your colleagues. Provide clarity, organization and completeness in your responses.

4. Behavioral finance and investments a. Complete a report on you observations of your first client, violet.

1) Describe siosan’s utility function. Contrast her utility function with that assumed in traditional finance theory,

2) discuss what biases siosan’s behavior reflects,

3) How a rational economic individual in traditional finance would behave differently with respect to each bias, and

4) Determine whether your observation about siosan’s retirement portfolio allocation is correct. Justify your response.

5. Behavioral corporate finance

Answer rating: 100% (QA)

Application of Behavioral Finance Executive Summary The financial area of any organization or company is extremely sensitive in the way that success can only be achieved through the ability to come up ... View the full answer