Informational Cascades

Syllabus for Stockholm PhD Minicourse

Ivo Welch

Preliminary: May 9, 2023

Introduction

This course introduces informational cascades (a form of rational herding) to interested PhD students. Although this subject is economic theory (and not really finance, although it has many applications therein), informational cascades are a very accessible theory. Even undergraduate economics senior students should be able to follow. The emphasis of this course is to convey the key economic insights with as little algebra as necessary.

The instructor understands that students are busy. Students are not expected to read anything before the course begins. However, they are asked to devote their full attention to this course during its five days. In addition to physical class attendance, they are asked to read papers in the four evenings in between the sessions. (These readings usually elaborate on the topics after they have been explained in the class sessions themselves, and are necessary to foster an adequate understanding.)

The class will require active (friendly) interaction between instructor and students attending the class. There will be no ipads, cell phones, computers, or zoom. Students should be expected to be asked questions and/or to ask questions.

There are no quizzes or exams and the class is pass-fail. (We may or may not have [audio] recordings. Students are allowed to miss one day if they can catch up before the following day.) Students that miss more than one day will not receive a pass.

I will also take class attendees out for a casual pizza-and-pasta like dinner on Thu May 8.

Topics

  1. Mon, May 5: Introduction and Basics

  2. Tue, May 6: Robustness of Model

  3. Wed, May 7: Special Models and Extensions

  4. Thu, May 8: Applications

  5. Fri, May 9: Open Student Discussion — cascades, modeling, theory, research, questions.

I apologize for the “Welch-heavy” reading list. I know the papers better and I obviously worked on aspects that I considered to be interesting. Other IC researchers would probably and reasonably include different papers, too. The survey (BHTW) lists many of them.

Administrativa

Registration etc. will be handled by the Doctoral Course at the Swedish House of Finance. Please contact Jenny Wahlberg Andersson

Planned Room at SSE: Torsten