• INTRODUCING EDEN
• EDEN IN FINANCE
• OBJECTIVE
• TARGET AUDIENCE
• COORDINATORS
• FACULTY
• OBJECTIVE AND MOTIVATION
• PROGRAM
• ADDRESS(ES)
• PRACTICALITIES

EDEN calls to everyone’s mind the garden of earthly delights to which the Book of Genesis refers. It evokes the attractive and creative environment that EIASM offers to young promising scholars who undertake the exciting doctoral adventure.
Through the creation of EDEN, EIASM will contribute to the most critical phases in a scholar’s life cycle : i.e. his/her introduction to and early growth on the academic market. Thanks to its unique image and its organizational competitive advantages (core of associations, autonomy and flexibility), EIASM can indeed be very efficient at :

• inserting young doctoral fellows into a highly stimulating system where European researchers can interact (within and across associations), sharing common objectives and concerns ;
• helping them in the positioning of their own work in relation to European research generally : expose them to various research traditions and orientations, open their minds to the international/global perspectives to be adopted when looking at the Management environment, make them aware of the challenges Management is facing in Europe (globalization, new technologies, etc.) ;
• creating a network of European educators active at the doctoral level in Management.

The programme in Finance will include seminars on :

• Corporate Finance I
• Corporate Finance II
• Credit Risk Modelling
• Investments I
• Investments II

This course’s purposes is to provide PhD students with interests in  finance and financial economics with a solid foundation in experimental finance, a growing and increasingly important field of economics. Asset pricing theory links information aggregation and the pricing and trading of assets in financial markets to the behavior of market participants. However the empirical evidence derived from the historical record of prices and trades provides little conclusive support to the implications of the theory. One  weakness of the empirical approach is that individual behavior is almost never observed. The experimental setting provides the unique opportunity to observe how agents behave in different controlled market environments and the resulting characteristics of trading flows, information aggregation and price setting process.

2nd or 3rd year PhD students in finance and financial economics or with strong interests in experimental economics. A solid understanding of asset pricing theory and a good awareness of the empirical evidence is assumed. The web link to Peter Bossaerts Module provides good references for review of basic asset pricing.

Bruno Gerard (Norwegian School of Management-BI and Center, Tilburg University)

Frans de Roon (Tias and Center, Tilburg University).

All three instructors have focused most of their recent research on experimental economics, are actively engaged in conducting financial markets experiments and have build a strong reputation of being at the forefront of the field.

Peter Bossaerts: William D. Hacker Professor of Economics and Management, Professor of Finance, and Executive Officer for the Social Sciences (Caltech, Pasadena, CA), Research Fellow (CEPR, London, UK)
Email: pbs@rioja.caltech.edu
Phone : +1.626.395.40.28
http://www.hss.caltech.edu/~pbs/

Orly Sade: Assistant Professor, Department of Finance, Jerusalem School of Business, Hebrew University of Jerusalem, Mount Scopus, Jerusalem, 91905, Israel
Office: (972)-2-588-3227,
Email: orlysade@mscc.huji.ac.il; http://bschool.huji.ac.il/facultye/sade/

Joep Sonnemans: Professor of Behavioral Economics at the Faculty of Economics and Econometrics of the University of Amsterdam, CREED and Tinbergen Institute.
Email: j.h.sonnemans@uva.nl
Phone: +31 20 525 4249
http://www1.fee.uva.nl/creed/people/sonnemans/index.shtml

Asset pricing theory derives from a set of assumptions about the behavior of economic agents the principles behind the pricing, trading and information aggregation in financial markets. Although the theory is very well developed, the empirical evidence is rather inconclusive to conclude that observed market trading and prices conform to the predictions of the theory. One of the only robust findings of the empirical research is that financial markets are very difficult to predict. This is hardly a ringing endorsement of the implications of sophisticated asset pricing theories. Hence the theory looks more like an elegant mathematical justification for the confidence that people have in financial markets, rather than a set of principles solidly based on scientific evidence and capable of predicting future outcomes.

The bulk of the empirical evidence to date has come from historical analysis of organized stock, bond, futures and options markets. Verification of theory on the basis of historical data is challenging and requires sophisticated statistical methods. The evidence has been rather discouraging, to the extent that some have resorted to purely statistical, "black box" modeling of financial markets, or to ‘behavioral’ explanations, not easily refutable in an empirical setting.

Asset pricing theory derives aggregate phenomena from the behavior of market participants. In actual markets, individual behavior is almost never observed. Laboratory markets, in contrast, provide a unique opportunity to observe individual behavior and to determine whether it links with market-wide phenomena as assumed in the theory. In these artificial competitive markets, one can study to what extent extant theory makes valid predictions and attempt to discover new principles on which theory can be extended.

Experimental Finance’s goals are exactly that: establish through experimental observation, how agents behave in different market settings and environment and what are the resulting characteristics of trading flows, information diffusion and aggregation, price setting mechanism and returns processes.

This course’s purposes is to provide PhD students in financial economics with a solid foundation in experimental finance.

Module 1 (1 day):  Joep Soonemans.
Introduction to experimental finance: general methodological issues that have to be addressed in an experimental setting:
· What kind of questions can be answered by finance experiments?
· From research-question to experiment design
· Common pitfalls and mistakes
· Practical issues in the experimental setting
With many examples!

Module 2 (1 day): Orly Sade.
Experimental auctions (see preliminary syllabus at insert link). How to use the experimental setting to understand the link between auction mechanism and bidding behavior and auction revenues. Experiment with several auction mechanisms (first price sealed bid, second price sealed bid, Dutch, English) with primary focus on common value divisible good auctions. The following experiments issues will be emphasized:
· How realistic should experiments be?
· How to select human subjects?
· Software vs manual experiments and communication among bidders.
· Practical issued regarding the analysis of experimental results.

Module 3 (day 3  to 5):  Peter Bossaerts
(see syllabus  at http://www.hss.caltech.edu/~pbs/EIASM/index.htm). How can experimental finance help the researcher understand the basic principles behind the pricing, trading and information aggregation in financial markets, and how they relate to the theory of asset pricing and general equilibrium. As part of the course, students participate in a trial financial markets experiment. Topics to be covered include:
· Risk aversion in the laboratory
· Implementing competitive markets in the lab: double auctions and open book trading systems
· Experiments on asset pricing theory in the static, complete-markets, complete-information setting
· Asset pricing with ambiguity
· Markets for insurance or loan contracts
· Information aggregation
· Equilibration dynamics

TIME AND LOCATION
The seminar will be held at the UNIVERSITY OF TILBURG.
The programme will start on December 12, 2005 and is scheduled to end December 16, 2005

PARTICIPATION FEE
The participation fee is 1500 €. This fee includes participation to the seminar, the documents, lodging and full board.
Doctoral students will be assigned rooms for two.

Should you wish a single room, an extra fee of 50 € per night will be charged to you.

Cancellations made before November 25, 2005 will be reimbursed with 10% deduction of the total fee. No reimbursement will be possible after this date.

EIASM SCHOLARSHIPS
The Institute offers a limited number of scholarships of 700 € each. Scholarships are strictly limited to students coming from an EIASM Institutional Member (the Academic Council). Allocation of the scholarships is entirely at the discretion of the European Institute.

APPLICATIONS
Interested doctoral students should register online (and add the required documents) no later than October 10, 2005. Besides doctoral students, other researchers may participate. The number of participants will be limited to create a stimulating environment. The selection among the applicants will be conducted by the Institute’s Faculty. They will review the following documents which should necessarily complement each application form:

• the applicant’s curriculum vitae demonstrating his/her capabilities of doing research ;
• a letter of recommendation of his/her local faculty supporting the application ;
• a two-page description of his/her doctoral research, indicating the general objectives.