Psychology and Economics

As an essential part of the course, students engage with academic literature at the intersection of psychology and economics. In small groups, they choose between working on either a paper replication, or a literature review. For both, paper replication and literature review, we provide a list of papers students can select from. Each group has to do two presentations: an initial one on the chosen paper’s methodology, results, and contribution, as well as a final one on either the paper replication, or the literature review.

The paper replication is based on the German Socio-Economic Panel (SOEP), which is a comprehensive panel dataset of German households. The SOEP contains in-depth information on individuals’ attitudes, values, and personalities. These data are enriched by respondents’ biographical background and financial balance sheet. Using the SOEP, students will replicate one key result of the chosen paper. In addition, we ask students to come up with (and possibly implement) an idea to extend the result at hand. Any codes (in Stata, R, or Python) or Excel sheets students create in the process have to be submitted at the day of the final presentation. Students also need to submit a short summary of the research idea aimed at extending the paper under study, which is also due on final-presentation day. The timetable for these tasks is below, written in italic.

For the literature review, the chosen paper serves as a point of departure. Students then need to identify related and relevant work to provide a summary and discussion of the current state of the literature. The timetable for these tasks is below, written in italic.

After the last lecture, we ask students to additionally write an individual essay reflecting on a key (childhood) experience and its long-run effects. Course concepts serve as a theoretical underpinning. For example, as single children students might have been shaped by parents’ indulging behavior. Students might identify that this is why Riemann’s hysterical form of fear suits their character, and how this affects their decision-making today.

Course Contents(Timetable Group Assignment):

1. Neoclassical and Behavioral Economics Refresher(Group and Paper Assignment)
2. Introduction to Emotional Finance
3. Overview of Psychological Theories
4. Developmental Psychology and Neuroscience (Guest Lecture)
5. Literature on Psychology and Economics(Presentation of Paper Summary)
6. Introduction to Empirical Part and Lit Review of Group Assignment(Start Work on Replication or Lit Review)
7. Tuckett’s Approach to Emotional Finance
8. Crowd Psychology and Herding in Capital Markets
9. Applications in Finance and Economics such as Personality, Identity, Trust, Gender, and Culture (Guest Lecture)
10. Group Presentations on Empirical Work or Lit Review

Students will have sharpened their empirical skillset.

Students will have obtained foundations in psycholanalysis.

group assignment (40%)

class participation (20%)