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2019/2020  KAN-CCMVI2084U  Personal and Household Finance: from learning how to become rich, to designing public policies

English Title
Personal and Household Finance: from learning how to become rich, to designing public policies

Course information

Language English
Course ECTS 7.5 ECTS
Type Elective
Level Full Degree Master
Duration Summer
Start time of the course Summer
Timetable Course schedule will be posted at calendar.cbs.dk
Max. participants 60
Study board
Study Board for MSc in Economics and Business Administration
Course coordinator
  • Course instructor: Rodrigo Zeidan, Associate Professor of Practice, New York University Shanghai and Affiliate Professor, Fundação Dom Cabral. http://rzeidan.com
    Sven Bislev - Department of Management, Society and Communication (MSC)
For academic questions related to the course, please contact instructor Rodrigo Zeidan at rz25@nyu.edu
Other academic questions: contact academic director Sven Bislev at sb.msc@cbs.dk
Main academic disciplines
  • Finance
  • Globalisation and international business
  • International political economy
Teaching methods
  • Face-to-face teaching
Last updated on 12/11/2019

Relevant links

Learning objectives
To achieve the grade 12, students should meet the following learning objectives with no or only minor mistakes or errors
  • Understand intertemporal financial choices for poor and rich people.
  • Develop long-term financial strategies.
  • Grasp the fundamentals of pension fund, mortgages, digital currencies and other financial assets for long-term financial planning.
  • Develop critical perspectives on public policies on household finance in poor and rich countries.
  • Establish a solid cost/benefit framework for policies related to wealth and income inequality.
Course prerequisites
Basic knowledge of financial accounting or corporate finance, and micro or macroeconomics.
Examination
Personal and Household Finance: from learning how to become rich, to designing public policies:
Exam ECTS 7.5
Examination form Home assignment - written product
Individual or group exam Individual exam
Size of written product Max. 15 pages
Assignment type Project
Duration Written product to be submitted on specified date and time.
Grading scale 7-point grading scale
Examiner(s) One internal examiner
Exam period Summer, Ordinary exam: Home Assignment: 23/24 June-24 July 2020. Please note that exam will start on the first teaching day and will run in parallel with the course.
Retake exam: Home Assignment: 72-hour home assignment: 5–8 October 2020 – for all ISUP courses simultaneously
3rd attempt (2nd retake) exam: 72-hour home assignment: 23–26 November 2020 – for all ISUP courses simultaneously

Exam schedules available on https:/​/​www.cbs.dk/​uddannelse/​international-summer-university-programme-isup/​courses-and-exams
Make-up exam/re-exam
Same examination form as the ordinary exam
Retake exam: 72-hour home project assignment, max. 10 pages, new exam question
Exam form for 3rd attempt (2nd retake): 72-hour home project assignment, max. 10 pages, new exam question
Course content, structure and pedagogical approach

Financial education is lacking in most countries, developed countries included. The main goal of the course is to develop an integrated framework of household finance for private and public use. Students will learn how to maximize their intertemporal utility given their life-cycle income, how to become rich if they want to pay the price for it, how to save, borrow, and purchase property (and if they should do it at all), and more. In terms of public policy, students should leave the course with a holistic view of wealth and income inequality, how poverty restrict sound financial decision-making and how policies can improve social outcomes by reducing (or increasing!) income inequality.

 

The first goal of the course is to develop a sound integrated framework for individuals to manage their finances with a long-term horizon in mind (based on the permanent income hypothesis). Such a framework does include learning how to integrate bitcoin and other digital currencies and derivatives in long-term portfolios (although that is not the main focus of the framework). Secondly, we will analyze the impact of credit restrictions and hyperbolic discounting in household financial management in poor and middle-income countries. Finally, we will investigate the role of public policy in improving household financial decisions. Importantly, household finance is stuck in low-value equilibriae where people's inability to save and invest efficiently lead to lower productivity growth and value added for all. In this final module, we will explain the determinants of wealth and income inequality and how economic policies can improve social outcomes.

 

Preliminary assignment: A two-page summary of Carlson, K., Kim, J., Lusardi, A., & Camerer, C. F. (2015). Bankruptcy rates among NFL players with short-lived income spikes. American Economic Review, 105(5), 381-84.
 
Class 1 Life-cycle income hypothesis: do you want to be rich?
Class 2 Financial markets and investment strategies.
Class 3 Financial markets and investment strategies: should you buy a house?
Class 4 Digital currencies and derivatives: leveraging at which cost?
Class 5 Financial Literacy in poor and rich countries.
 
Feedback: Approval the topic of final paper
 
Class 6 Credit constraints, hyperbolic discounting and making choices while poor.
Class 7 Poor economics and policymaking.
Class 8 Wealth and income inequality.
Class 9 Savings glut, pension funds and public policies in rich countries.
Class 10 The Sustainability Credit Score System and green finance.
Class 11 Comprehensive Review.

 

Description of the teaching methods
All teaching takes place on campus (notice that face-to-face teaching may include the use of online materials and tools.
Feedback during the teaching period
Feedback will be constantly provided and the students will need to seek approval regarding the final topic of their final paper.

Home Project Assignments/mini projects are based on a research question (problem formulation) formulated by the students individually. Approval deadline will be defined by the instructor. Hand-in of the problem formulation directly to the instructor by the 3rd teaching week.
Student workload
Preliminary assignment 20 hours
Classroom attendance 33 hours
Preparation 126 hours
Feedback activity 7 hours
Examination 20 hours
Further Information
Preliminary Assignment: To help students get maximum value from ISUP courses, instructors provide a reading or a small number of readings or video clips to be read or viewed before the start of classes with a related task scheduled for class 1 in order to 'jump-start' the learning process.
 
Course timetable is available on https://www.cbs.dk/uddannelse/international-summer-university-programme-isup/courses-and-exams
 
We reserve the right to cancel the course if we do not get enough applications. This will be communicated on https://www.cbs.dk/uddannelse/international-summer-university-programme-isup/courses-and-exams end March 2020.
Expected literature

Mandatory readings:

 

Milanovic, B. (2015). Global inequality of opportunity: How much of our income is determined by where we live?. Review of Economics and Statistics, 97(2), 452-460.
 
Aguiar, M., & Hurst, E. (2016). Permanent-Income Hypothesis. The New Palgrave Dictionary of Economics, 1-5.
Carlson, K., Kim, J., Lusardi, A., & Camerer, C. F. (2015). Bankruptcy rates among NFL players with short-lived income spikes. American Economic Review, 105(5), 381-84.
 
Duflo's Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty. Journal of Economic Literature, 50(1), 103-114.
 
Planning for retirement: Long-term savings and investment in the UK. Blackrock.
 
How People Plan for Retirement, by Anna Rappaport, Chairperson, Society of Actuaries Committee on Post-Retirement Needs and Risks

Brown, M., Grigsby, J., Van Der Klaauw, W., Wen, J., & Zafar, B. (2016). Financial education and the debt behavior of the young. The Review of Financial Studies, 29(9), 2490-2522.
 
Fixed-income derivatives made simple: What a trustee needs to know
 
Banerjee, A. V., & Duflo, E. (2007). The economic lives of the poor. Journal of economic perspectives, 21(1), 141-168.
 
Böhme, R., Christin, N., Edelman, B., & Moore, T. (2015). Bitcoin: Economics, technology, and governance. Journal of Economic Perspectives, 29(2), 213-38.
 
Zeidan, R. (2018) Economics of Global Business, MIT Press, chapter 12.
 
Guesmi, K., Saadi, S., Abid, I., & Ftiti, Z. (2019). Portfolio diversification with virtual currency: Evidence from bitcoin. International Review of Financial Analysis, 63, 431-437.
 
Antonakakis, N., Chatziantoniou, I., & Gabauer, D. (2019). Cryptocurrency market contagion: market uncertainty, market complexity, and dynamic portfolios. Journal of International Financial Markets, Institutions and Money, 61, 37-51.
 
Zeidan, R; Spitzeck, H. (2015) The Sustainability Delta: Considering Sustainability Opportunities in Firm Valuation, Sustainable Development, 23(6) 329-42. Lectures -8 and 9.
 
Zeidan, R.; Boechat, C.; Fleury, A. (2015). Developing a Sustainability Credit Score System. Journal of Business Ethics, 127 (283-296).
 
Additional relevant readings:
 
Cai, S., & Park, A. (2016). Permanent income and subjective well-being. Journal of Economic Behavior & Organization, 130, 298-319.
 
Messy, F. A., & Monticone, C. (2016). Financial education policies in Asia and the Pacific.
 
Retirement Planning From Start to Finish: Society of Actuaries.
 
The global financial crisis and the evolution of markets, institutions and regulation, Journal of Banking & Finance 35, 502–511, (Moshirian, F., 2011).
 
Brady, D., Giesselmann, M., Kohler, U., & Radenacker, A. (2018). How to measure and proxy permanent income: evidence from Germany and the US. The Journal of Economic Inequality, 16(3), 321-345.
 
Milanovic, B. (2016). Global inequality: A new approach for the age of globalization. Harvard University Press.
 
Shahzad, S. J. H., Bouri, E., Roubaud, D., & Kristoufek, L. (2019). Safe haven, hedge and diversification for G7 stock markets: Gold versus bitcoin. Economic Modelling.
Last updated on 12/11/2019