FIN 720 Seminar in Banking and Behavioral Finance

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1 FIN 720 Seminar in Banking and Behavioral Finance Fall 2018: Bubbles Maximilian Germann / PD Dr. Maximilian Wimmer University of Mannheim

2 Administrative Issues Contact Details Maximilian Wimmer (0621) L 9, 1-2, room 307 1

3 Administrative Issues Schedule Detailed schedule available at: Important dates: Jun 01 Jun 22 Jul 02 Submission of priority lists (online) Announcement of allocation Starting date Jul 02 Jul 06 Early July Monday, Aug 13 Mid September Registration/withdrawal period Kick-off meeting Submission of seminar papers Seminar 2

4 Administrative Issues Allocation of Topics You may choose from the topics of all finance chairs General requirement: At least one finance course at the Master level (FINXXX) The topics are allocated according to priorities and grades Each of our 2 topics is allocated to 2 students (total 4 participants) 3

5 Administrative Issues Also Important to Know Language of seminar paper: English Participation: Participation in the seminar is mandatory for passing Master s thesis: Seminar in finance is entry requirement for the Master thesis New: If you take the seminar in Fall 2018, you can already write your Master s thesis also directly after the seminar in Fall 2018! (Similar for all future semesters) 4

6 Administrative Issues Introduction to Scientific Methods The kick-off meeting takes place at the beginning of the writing phase (presumably July 03, 2018) Topics: Grading criteria in the seminar Formal requirements Language and style Structure of the paper Literature search and correct citation Infos regarding your presentations in the seminar 5

7 Administrative Issues Topics in Fall 2018 In the following semester, we offer a seminar with topics that cover current research developments in: Bubbles Bubbles are typically associated with dramatic asset price increases followed by a collapse. Bubbles arise if the price exceeds the asset s fundamental value. This can occur if investors hold the asset because they believe that they can sell it at a higher price than some other investor even though the asset s price exceeds its fundamental value. (Brunnermeier, 2008) The seminar will be about exploring both theoretical motives for the formation of asset bubbles and on empirical evidence on recent asset bubbles. 6

8 Administrative Issues Seminar Topics W01 (Wimmer) Rational and Irrational Motives for Asset Bubbles Generally, the theoretical literature on asset bubbles can be divided into two groups: Rational asset bubbles and irrational (or behavioral) asset bubbles. While the first stream of literature considers the formation of inflated asset prices under a rational expectations paradigm, the latter stream of literature focuses on the interaction of rational and non-rational investors. The aim of the seminar thesis will be to focus on one of the two streams of literature and provide an state of the art overview of the respective stream. Dilip, A. and Brunnermeier, M. (2003). Bubbles and crashes. Econometrica 71, pp Hong, H., Scheinkman, J., and Xiong, W. (2008). Advisors and asset prices: A model of the origins of bubbles. Journal of Financial Economics 89, pp Barberis, N., Greenwood, R., Jin, L., and Shleifer, A. (2017). Extrapolation and bubbles. Journal of Financial Economics, forthcoming. 7

9 Administrative Issues Seminar Topics W02 (Wimmer) Empirical Literature on Asset Bubbles The aim of this seminar thesis will be to concentrate on one asset bubble and present an overview of the respective literature. Alternatively, the seminar thesis can also concentrate on experimental evidence on the formation of asset bubbles. Pastor, L. and Veronesi, P. (2006). Was there a Nasdaq bubble in the late 1990s? Journal of Financial Economics 81, pp Hong, H. and Sraer, D. (2013). Quiet Bubbles. Journal of Financial Economics 110, pp Brunnermeier, M. and Schnabel, I. (2016). Bubbles and Central Banks: Historical Perspectives. Central Banks at a Crossroads: What Can We Learn from History? Cambridge University Press. 8