University of Maryland Business School Finance Symposium Highlights Behavioral Finance

College Park, Md. March 29, 2007 - World-leading academics shed new light on how psychological factors and emotional biases affect financial decision-making and stock market price as they share research findings at the seventh finance symposium Behavioral Finance, hosted by Finance Department of the Robert H. Smith School of Business, University of Maryland, March 29-31.

The symposium kicks off with a reception and keynote address by Robert B. Shiller, a professor of economics and finance at Yale University and author of the best-selling Irrational Exuberance, an analysis and explanation of the stock market boom since 1982.

In addition to Smith School faculty, experts from leading institutions will share and discuss key research findings, which include:

• Evidence that the limits-of-arbitrage approach cannot explain economically important asset-pricing anomalies. The Limits of the Limits of Arbitrage, by Alon Brav, Duke University; and J.B. Heaton, Bartlit Beck Herman Palenchar & Scott LLP.

• Entertainment as a motivation for financial trading findings that clients who say they enjoy gambling and investing turn over their portfolio at twice the rate of others. Trading as Entertainment, by Daniel Dorn, Drexel University; and Paul Sengmueller, Universiteit van Amsterdam.

• Affiliated analysts issue more optimistic recommendations than unaffiliated analysts, but their earnings forecasts are more pessimistic. Do Security Analysts Speak in Two Tongues?, Ulrike Malmendier, University of California, Berkeley; Devin Shanthikumar, Harvard University.

•  Sin stocks those of publicly traded companies involved in producing alcohol, tobacco, and gaming provide evidence of the effects of social norms on markets. The Price of Sin: The Effects of Social Norms on Markets, by Harrison Hong, Princeton University; Marcin Kacperczyk, University of British Columbia.

In total, 10 research papers exploring topics related to behavioral finance will be presented at the conference, selected in a competitive process involving evaluation by an external panel of reviewers.

To better understand financial markets, we have to look at a basic, underlying volatility human nature and how it impacts financial decisions, said Lemma Senbet, holder of the William E. Mayer Chair at the Robert H. Smith School of Business. Im very pleased that the finance department at the Smith School has assembled such an impressive group of leading academics to delve into a broad range of behavioral finance topics. Attendees will benefit from discussing, among other things, the limits of arbitrage, CEO overconfidence and myopia, herding and under/over-reaction in financial markets, trading behavior and volume, marketing timing and consumer finance.