Instructor Manual

Instructor and student manuals accompany the Finance for Normal People book. The instructor manual includes questions and also answers in “teaching notes.” The student manual includes only questions.

Some answers draw directly from the chapters. Others ask students to explore materials beyond the chapters, directing them to the Internet, including youtube clips. Yet others are problems with accompanying excel sheets. Excel sheets, like the manual, come in two versions, a student version available to students and an instructor version available to you, containing the solutions.


Some questions outline experiments you can conduct in class. Be aware, however, that outcomes of these experiments will often diverge from outcomes reported in the literature. Experiments reported in the literature follow protocols where experimenters know the purpose of an experiment but subjects do not. For example, questions that matter to experimenters are often asked along with other questions that do not matter, so subjects remain unaware of the purpose of experiments. You would not be able to replicate all experiments reported in the literature because the context of the course alerts students to the nature of the experiment and put them on guard.

The instructor manual also includes a sample syllabus I use in my behavioral finance course. I ask students to submit answers to some manual questions and also write term papers. The syllabus contains a range of term-paper topics as examples, but I encourage students to think about other topics they wish to explore.

Guest speakers from the field of finance greatly enrich the course. Speakers include financial advisers and consultants, money managers, corporate managers, and financial entrepreneurs. I ask guests to speak about their work for the first 30 minutes or so of a session, leaving much time to Q&A. I do not ask guest speakers to link their talks explicitly to behavioral finance. Your students and you can link guest speakers’ talks to behavioral finance during the Q&A portion of the session or during the following sessions.

Two examples from the instructor manual
Hindsight shortcuts and errors
  1. Search the Internet and elsewhere for forecasts of returns of stocks, bonds, gold, and other investments, made in foresight earlier. How accurate are they when judged today, with hindsight? What do they teach us about hindsight shortcuts and errors? See, for example:



Teaching note: You might wish to create a questionnaire at the beginning of the course, asking students about their forecast of the S&P 500 Index at the end of the course, or at some specified date during the course. (Provide current level of the index). Ask them also for 90% confidence intervals around their estimate, for use later in the discussion about overprecision. Someone’s estimate would prove to be most accurate. You can also use it as an illustration of availability errors and confirmation errors – if people pick only the accurate forecasts because it is readily available or because they serve as confirmation of a belief that it is easy to see the future in foresight.

Behavioral portfolios
  1. The standard argument for investing in gold is its utilitarian benefits, mostly diversification benefits. Proponents usually mention the low correlation between the returns of gold and those of other investments, such a stocks. See for example:


In the excel file “Gold-Students” you have monthly returns of gold, bonds, and stocks. Calculate the correlations between the returns of gold and bonds, gold and stocks, and bonds and stocks. What do the correlations tell us about the relative benefits of diversification between stocks and gold and stock and bonds?

What benefits do investors find in gold beyond its utilitarian diversification benefits? Discuss with reference to: http://www.jasonzweig.com/lets-be-honest-about-gold-its-a-pet-rock/


Teaching note: Gold is a prominent example of an investment with utilitarian, expressive, and emotional benefits. There are utilitarian benefits to investing in gold, but it is likely that people investing in gold also derive expressive and emotional benefits.

The correlation between the returns of gold and stocks are approximately equal to the correlation between the returns of bonds and stocks, as you see in the excel file “Gold-Instructors.”

Investors with high proportions of gold in their portfolios are likely politically conservative, whereas SRI and ESG investors likely tilt toward liberalism. This analysis can generate good discussion of the utilitarian, expressive and emotional benefits of investments. Do people discuss their inclination toward SRI or gold in terms of utilitarian benefits (e.g., I’ll get higher returns) or in terms of expressive and emotional benefits (e.g., I’ll be true to my values).

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