QUESTION ONE $[20$ Marks$]$

Write short notes on the following

I. Choice bracketing

II$.$ Anchoring

III. Hindsight bias

@$4$ Marks

IV$.$ Narrow framing,

V$.$ Familiarity

QUESTION TWO $[20$ Marks$]$

Part a $[4$ Marks$]$

Explain the relationship between momentum and attitude to risk.

Part b $[16$ Marks$]$

How can market overreaction and underreaction be explained by Behavioural finance?

QUESTION THREE $[20$ Marks$]$

Part $($a$)10$ Marks

Psychological research has indicated that there is a relationship between individuals' saving behaviour, their personality traits and self$-$control. Discuss the key findings of the papers published by the following authors:

i$.$ Puri and Robinson $(2007)-$ Optimism and economic choice. Journal of Financial Economics $86,71-99$

ii$.$ Thaler and Shefrin $(1981)-$ An Economic Theory of Self Control. Journal of political Economy, Vol $89(2),392-406$

iii. Choi, Laibson, Madrian and Metrick $(2001),$ Defined Contribution Pensions: Plan Rules,Participant Choices, and the Path of Least Resistance. Tax Policy and the Economy, Vol $16.$ MIT Press

Page $2$ of $3$

Scanned with CamScanner

Page $3$ of $3$

$$v$.$ Tice et al$.(2001).$ Emotional Distress Regulation Takes Precedence Over Impulse

Control: If You Feel Bad, Do It$!$ Journal of Personality and Social Psychology, Vol. $80,$ No$.1,53-67$