Skip to main content

Unit information: Behavioural Finance in 2020/21

Unit name Behavioural Finance
Unit code EFIM30062
Credit points 10
Level of study H/6
Teaching block(s) Teaching Block 1 (weeks 1 - 12)
Unit director Dr. Sonny Biswas
Open unit status Not open
Pre-requisites

None

Co-requisites

None

School/department School of Accounting and Finance
Faculty Faculty of Social Sciences and Law

Description

The objective of the unit is to provide an understanding of psychological biases which affect financial decision-making and to consider the related empirical evidence. It will introduce to students some long-standing puzzles in Finance (such as the Equity Premium Puzzle) and discuss the resolution of these puzzles using behavioural models. It will also cover topics in Corporate Finance such as consequences of over-confident corporate managers on investment and financing decisions of firms. Finally, it will provide a behavioural perspective on the Global Financial Crisis of 2007-09.

The aims of the unit are to:


1. Provide students with the tools to enable them to detect the presence of systematic biases in individual and group decision-making.
2. Enable students to critique models in Finance which assume perfect rationality.

Intended learning outcomes

At the end of the unit students will be expected to be able to:

  1. Critically review the Efficient markets hypothesis and associated empirical irregularities.
  2. Explain how heuristics lead to systematic biases.
  3. Apply an understanding of systematic biases to show how they can be exploited to make profits in financial markets.
  4. Evaluate the appropriateness of behavioural assumptions in different contexts.
  5. Compare and contrast the role of behavioural and rational theories to explain observed outcomes in corporate finance.
  6. Analyse, using understanding of cognitive biases, the role of behaviour in exacerbating global financial events

Teaching details

Teaching will be delivered through a combination of synchronous and asynchronous sessions including lectures, tutorials, drop-in sessions, discussion boards and other online learning opportunities

Assessment Details

This unit will be assessed by 100% exam

Reading and References

There is no one textbook that covers everything we do in the course, but we will reference the following, amongst others.

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.

Feedback