Yale Bulletin and Calendar

May 7, 2004|Volume 32, Number 29|Two-Week Issue

SOM center wins grant for
study of behavioral finance

The International Center for Finance (ICF) at the School of Management (SOM) received a $1.6 million grant for the study of behavioral finance -- The Whitebox Advisors Grant -- bestowed by Andrew Redleaf '78 B.A., '78 M.A., and his company, Whitebox Advisors.

Behavioral finance is a field of economics that attempts to understand and explain how social and psychological factors, such as bias and emotion, influence economic and financial decision-making. Its study has enhanced an understanding of financial phenomena such as why some investors don't save adequately for retirement, the volatility of the market and speculative bubbles.

The grant will expand behavioral finance research at Yale through the funding of additional research support and outreach. Among the initiatives planned are new behavioral research projects, including the launch of an annual survey of recent homebuyers to measure attitudes toward real estate values; broadening existing research, including the international expansion of the Yale School of Management Stock Market Confidence Indexes™, the longest-running survey of investor confidence; conferences, lecture series and books to disseminate new research; and the appointment of Whitebox Advisors Visiting Scholars and Whitebox Advisors Doctoral Fellowships.

The program will be led by William N. Goetzmann, director of ICF and professor of finance at SOM; Robert J. Shiller, professor of economics and a founder of behavioral finance, whose book "Irrational Exuberance" introduced behavioral finance and the psychology of markets to a wide audience; and Ravi Dhar, a leading behavioral decision theorist and professor of marketing at SOM.

"Behavioral finance is one of the most exciting and controversial areas of research in economics," says Goetzmann. "This gift will create the means to position Yale to be the world leader in research and teaching in this field. We are sincerely grateful for the generosity of Andrew Redleaf and Whitebox Advisors."

ICF is an interdisciplinary research institute with fellows from Yale's Departments of Economics, Statistics and Mathematics, as well as the Law School and SOM -- many of whom are already active in the study of behavioral finance. According to Shiller, the ICF will reach out further into the Yale community to build the behavioral finance program.

"We would like to build on Yale's strengths in behavioral finance to create a truly interdisciplinary research and teaching agenda," says Shiller. "Behavioral finance is, by its nature, interdisciplinary and relies on psychologists, sociologists, behavioral decision theorists, marketing researchers, financial economists, macroeconomists and accounting researchers, among others. Yale is fertile ground for this kind of research and we look forward to collaborating with scholars throughout the university and beyond."

For more information about SOM and ICF, visit http://mba.yale.edu/ and http://icf.som.yale.edu/.

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