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Unit information: Behavioural Finance in 2020/21

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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
Faculty Faculty of Social Sciences and Law

Description

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.

Intended learning outcomes

By the end of the unit a student is expected to:

  1. Critically review the Efficient Markets Hypothesis and associated empirical irregularities.
  2. Describe the nature and role of investor biases in financial decision making. Apply this knowledge to personal investment decisions.
  3. Recognize that systematic biases may be exploited to make profit.
  4. Learn how to incorporate loss aversion and ambiguity aversion in a standard (rational) utility maximisation framework.
  5. Assess and judge the merits of the behavioural assumptions.

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

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.

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