As of 11/9/2010

AEM 4230: Contemporary Topics in Applied Finance

Fall 2010
TTh 1:25pm – 2:40pm, 145 Warren Hall

Instructor
Dr. Vicki Bogan
Office: 454 Warren Hall
Phone: 254-7219
E-mail: vlb23@cornell.edu
Office Hours: Tuesdays and Thursdays

Course Web Page: www.blackboard.cornell.edu

Teaching Assistants
Sivalai Vararuth Anesha Agarwal
sv223@cornell.edu aa483@cornell.edu
Office Hours: Office Hours:
Wednesdays 10am – 12pm By appt.
Warren 432 Warren 46

Course Description: This course is designed to stimulate critical thinking about contemporary topics that attract
regular attention in the press among key finance decision-makers. The course draws on the theory of modern
finance to facilitate the understanding of real world issues. The course will cover topics in traditional and
behavioral finance; focusing on corporate governance, financial markets, portfolio formation, market efficiency,
IPOs, and fixed income securities.

Course Goal: My goal with this course is to demystify many contemporary finance topics and facilitate an
understanding of real world finance issues.

Course Prerequisites: AEM 3240, AEM 2100 or equivalent, MATH 1110 or equivalent, and ECON 1110.

Required Readings: 1) Selected Chapters from Behavioral Corporate Finance by H. Shefrin, 2) Selected
Chapters from Investments by Bodie, Kane, & Marcus, 3) Selected Chapters from Behavioral Finance by Ackert
& Deaves, 4) Conspiracy of Fools by K. Eichenwald, 5) House of Cards by W. Cohan, 6) Liar’s Poker by M.
Lewis, 7) Additional articles in course pack. Copies of Behavioral Corporate Finance, Investments, and
Behavioral Finance have been placed on reserve in Mann Library.

Course Requirements:
Option I Option II
Final (cumulative) 25% 45%
Midterm Exam 20% 0%
Group Project 20% 20%
Homework Assignments 20% 20%
Class Participation 15% 15%

Page 1 of 5
Exams: The in-class midterm exam is October 19, 2010. No need to request a make-up exam because of a
conflict with a job interview. Only in the case of a family emergency or medical emergency, confirmed by a
dean, will a make-up midterm exam be given. In the event of a mistake in grading an exam, a student may
request a re-grade. For a re-grade, the student must: 1) Write a legible report that list the question(s) that the
student believes was graded incorrectly with an explanation of how his/her answer conforms to the one provided
in the answer key. 2) Submit the report to the instructor within one week (7 days) of receiving the graded exam.
Be advised that re-grading is just that. The entire exam will be re-graded and a student’s grade may
increase/decrease/remain unchanged.

Please note that historically, the final for this course has been scheduled on or near the end of the final exam
period. The final exam has been scheduled by the registrar for Dec. 14, 2010 at 7:00pm. Please plan
accordingly, as I cannot change the date of the final.

Homework: Late homework assignments will NOT be accepted. If homework is e-mailed, it must be received
before the start of the class in which it is due. E-mail homework to Sivalai Vararuth: sv223@cornell.edu At
the end of the semester, I will drop your two lowest homework grades. Homework answers will be posted on the
course web page.

Learning Teams: You will be assigned to a learning team (5-6 people) for the purpose of doing group
assignments. There will be two major group assignments during the semester (group project & warm-up).
Additionally, there will be small, in-class assignments done in your learning team groups. At the end of the
course, the other members of your group will evaluate your participation. These peer evaluations will be factored
in as part of your class participation grade.

Group Project: Everyone will be required to participate in a group project. For the project, each group will do a
poster presentation of an academic paper. Details on the poster presentation will be discussed in class.

Warm-Ups: Each class, one learning team will be assigned to present an example of “Finance in the News”.
Each learning team will be required to discuss a recent (past 4 months) article found in the Wall Street Journal,
the Financial Times, The Economist, etc. that pertains to something (anything) covered in the course. The
presentation should address: 1) why the issue is important and 2) how the article is related to a previous lecture or
class discussion. The presentation should be approximately 5-10 minutes.

Class Participation: The total class participation grade is comprised of three components: 1) participation in
class discussions, 2) your “warm-up” presentation, 3) your peer evaluations.

Section: There will be an optional section for this class on Mondays from 6:00pm – 7:00pm in 201
Warren Hall.

Extra Credit Opportunities: During the course of the semester, you may be able to take advantage of extra
credit opportunities for improving your grade. There will be several opportunities and each student will be able to
get extra credit for up to two extra credit opportunities. Details on each opportunity will be discussed in class.
There will be no make ups for extra credit opportunities and no special extra credit opportunities will be provided
to individual students.

Page 2 of 5
Academic Integrity: You are expected to adhere to Cornell’s Code of Academic Integrity which can be found at:
http://web.cornell.edu/UniversityFaculty/docs/AI.Acknow.pdf

Classroom Conduct Expectations: 1) Conduct yourself in a “professional manner”, 2) Come to class on time,
3) Be prepared to participate, 4) No eating during class, 5) No side conversations when someone else has the
floor.

E-mail Policy: I check student e-mails once per weekday. Make sure to put AEM 4230 in the subject line of the
e-mail. E-mail is to be used for short, non-technical questions. Please be respectful when sending e-mail.

Special Student Needs: Any student with a documented physical or learning disability in need of
accommodation should notify me at the beginning of the semester.

Page 3 of 5
 LECTURE SCHEDULE
(Subject to Change)

Date Topic Reading Due Homework Due

Aug. 26, 2010 Class Overview
Aug. 31, 2010 Behavioral Finance Foundations Shefrin: Ch. 1
Sept. 2, 2010 Corporate Governance: Group Shefrin: Ch. 9, Ch. 8
Process; Agency Conflicts
Sept. 7, 2010 Corporate Governance: Malfeasance CP: Section 1; HW1;
KE: Ch. 1-5 Submit list of learning
team members
Sept. 9, 2010 Corporate Governance: The Smartest KE: Ch. 6-13
Guys in the Room
Sept. 14, 2010 Corporate Governance: Malfeasance KE: Ch. 14-23 HW2
Sept. 16, 2010 Corporate Governance: Malfeasance WC: Ch: 1-12
Sept. 21, 2010 Corporate Governance: Anatomy of
Fraud – Pamela Kelleher, E&Y
Sept. 23, 2010 Corporate Governance: Vivendi Vivendi Universal Case HW3
Universal
Sept. 28, 2010 The Mortgage Crisis: Residential CP: Section 2
Mortgages
Sept. 30, 2010 The Mortgage Crisis: Residential ML: Entire book
Mortgages Backed Securities; Liar’s
Poker
Oct. 5, 2010 The Mortgage Crisis: MBSs, CDSs WC: Ch. 13 – 31 &
Epilogue
Oct. 7, 2010 The Mortgage Crisis: What Went HW4
Wrong
Oct. 14, 2010 The Mortgage Crisis: Financial Dodd-Frank Bill: Skim
Reform version posted on
Blackboard
Oct. 19, 2010 Midterm
Oct. 21, 2010 Extra Credit Quiz – Conspiracy of
Fools;
The Mortgage Crisis: What Went
Wrong
Oct. 26, 2010 Group Project Guidelines;
Extra Credit Quiz – Liar’s Poker
Oct. 28, 2010 Efficient Markets and Investment CP: Section 3 Submit paper selection
Decision Making: Investment for group project
Environment
Nov. 2, 2010 Efficient Markets and Investment Ackert: Ch. 1, 2, 4
Decision Making: Statistics Review, CP: Section 4
Portfolio Management – Traditional BKM: Ch. 11
CP: Section 5
Nov. 4, 2010 Efficient Markets and Investment BKM: Ch. 12
Decision Making: Portfolio Ackert: Ch. 5
Management – Traditional & CP: Section 6
Behavioral

Page 4 of 5
 LECTURE SCHEDULE (cont.)
(Subject to Change)

Date Topic Reading Due Homework Due

Nov. 9, 2010 Efficient Markets and Investment Shefrin: Ch. 4, Ch.5 HW5; Bring your
Decision Making: Portfolio (Sections 5.1 – 5.5 only) clicker if you have one
Management – Behavioral Ackert: Ch. 8, 9
Nov. 11, 2010 Efficient Markets and Investment Shefrin: Ch. 5 (Section HW6
Decision Making: IPOs / Google 5.6); CP: Section 7
Nov. 16, 2010 Efficient Markets and Investment
Decision Making: IPOs and the
Internet Bubble
Nov. 18, 2010 Efficient Markets and Investment Shefrin: Ch. 10
Decision Making: Mergers
&Acquisitions
Nov. 23, 2010 Presentations HW7
Nov. 30, 2010 Presentations
Dec. 2, 2010 Course Wrap-Up

Shefrin – Behavioral Corporate Finance by Hersh Shefrin

BKM – Investments by Bodie, Kane, and Marcus
Ackert – Behavioral Finance by Ackert and Deaves
KE – Conspiracy of Fools by Kurt Eichenwald
WC – House of Cards by William Cohan
ML – Liar’s Poker by Michael Lewis
CP – AEM 4230 Course Pack

Page 5 of 5