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Fin 4201/8001 Warren Buffett and Real World Investing
Layout of the Class • What’s my grade??? • Exams = one or two • Group project ≈ Final • Participation/Attendance • What topics? • Warren Buffett • Firm valuation • Behavioral Finance
Warren Buffett #2 Warren Edward Buffett Net Worth: $40.0 billionSource: Investments, Berkshire HathawaySelf madeAge: 75Marital Status: Widowed, 3 childrenHometown: Omaha, NEEducation: University of Nebraska Lincoln, Bachelor of Arts / ScienceColumbia University, Master of Science
Firm Valuation • Supplemental book, but I’ll give you all you need. • Look at syllabus for outline • Presentation as if pitching to Warren
Behavioral Finance • We fall prey to our own heuristics • Again supplemental book is good reference • Efficient Markets Hypothesis • Can’t explain some things • Examples follow but will examine more later in the course
Human Behavior Examples • Piece of paper is folded in half, then half again. After 100 folds how thick will it be? • 1.6 billion trillion miles • Compared with what you see on the street, how many of you are above average drivers? • One survey had 82% of respondents claiming to be above average.
Human Behavior Examples • A fair coin has come up “tails” four times in a row. What do you bet on next? • Honestly, would you really pick tails?? • Equal chance win $19 vs. lose $20. • Bet? • Does it change if you are already up $200? • House money effect
Start Video • Any Questions????????