Unit name | Behavioural Finance |
---|---|
Unit code | EFIMM0016 |
Credit points | 15 |
Level of study | M/7 |
Teaching block(s) |
Teaching Block 2 (weeks 13 - 24) |
Unit director | Dr. Sonny Biswas |
Open unit status | Not open |
Pre-requisites |
None |
Co-requisites |
None |
School/department | School of Accounting and Finance - Business School |
Faculty | Faculty of Social Sciences and Law |
The purpose of the unit is to provide an understanding of psychological biases which affect financial decision-making and to consider the related empirical evidence.
The first part of the unit will provide a brief introduction to the general models in Behavioural Finance (such as Prospect Theory, Ambiguity Aversion and Herding).
The second part of the unit will focus on the implications of behavioural biases for Corporate Finance. For example, it will cover topics such as security issuance and market timing, dividend policy decisions and wealth destruction in mergers and acquisitions arising from managerial overconfidence.
By the end of the unit a student is expected to:
Ten 2-hour lectures. Five 1-hour seminars.
Assessment Details
2-hour exam (100%) (Mix of mathematical and essay-type questions).
Essay-type questions will assess breadth of knowledge (from readings which are assigned over and above lecture notes). This is test the intended learning outcomes 1, 2, 3, and 5.
The mathematical questions will assess the understanding of the inner workings of the models that are taught in the unit. This will test the intended learning outcomes 4 and 5.
Reading and References
Textbooks:
Thaler, R. (2016) Misbehaving: The making of behavioural economics, Norton.
Burton, E. and Shah, S. (2013) Behavioural finance: Understanding the social, cognitive and economic debates, Wiley.
Ackert, L.F. and Deaves, R. (2009) Behavioural finance: Psychology of decision making and markets, South-Western.
Shefrin, H. (2007) Behavioural corporate finance: decisions that create value, McGraw-Hill.
Damodaran, (2010) Applied corporate finance, John Wiley & Sons.
Malkiel, B. (2008) A random walk down wall street: The time-tested strategy for successful investing, Norton.