Behavioral Finance

You can use any materials you want to answer the questions but please answer them in your own words and cite facts or quoted material you use.
You don’t have to use APA style for the citations, i.e., just stating the author name, year of publication, and a brief title is good enough for the exam (for example,

Sornette (2003), Why Stock Markets Crash). You can put the citation wherever you like (in the text, at the bottom of the page, or at the end.)

Feel frsee to write the answers in the informal style and voice you would use for an in-class exam, i.e., you do not have to use APA style or make it read like a term

paper. You can be as technical as you wish.
1. Compare and contrast the a) intrinsic value (also called fundamental value) and b) modern portfolio theory (CAPM and its extensions) approaches to determining the

value of a security, company, or investment. How would you summarize the conclusions from the vast empirical literature about the usefulness and applicability of

modern portfolio theory in practice?

2. Which key assumptions from modern portfolio theory are challenged by behavioral finance? How would you summarize the key conclusions, or results, from behavioral

finance? Choose one of the "anomalies" uncovered by behavioral finance writers; which theoretical concepts from behavioral finance can be used to explain

it.?

3. What set of characteristics, or metrics, would you use to identify the existence of a bubble in asset prices and subsequent financial crisis? What does modern