Week 7 - Genetics, Experience and Financial Literacy

Question 1

What are the de-biasing techniques?

Answer 1

• Explicit de-biasing techniques, e.g. for overconfidence:
  Training and accelerated feedback.
  List three reasons “why not.”
  Give a public rationale for your decision.
• Institutional design (implicit techniques):
  Nudging and libertarian paternalism.
  Two principles:
  Don’t restrict the range of options available to people.
  But construct sensible default options, because inertia my lead people to choose the default option.

Question 2

What is the lecture conclusion?

Answer 2

Individuals are genetically predisposed to certain financial behaviors.
Environmental factors are also important:
Social interactions.
Financial wealth.
Household size.
Emotions and brain activity can predict financial decisions.
Implications for prescriptive behavioral finance.