BEHAVIORAL FINANCE (BA4034)

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Behavorial finance investigation is based on concepts of cognitive psychology decision theory. In addition, behavioral finance studies how real-life investors interpret and act on available information. Financial theories are dominated by efficient market theory assuming rational agents. he key assumption of financial models under this theory is the rational behavior of investors and other economic agents. Empirical observation demonstrates this assumption regularly is violated.Markets often are inefficient. Information disclosure is expensive, and accordingly is distributed asymmetrically. Heuristics may change the investors’ behavior and bias their decisions. Among biases are that each investment decision depends on our previous investment decisions: we are anchored by memory and experience and Bayesian approaches to the data are not of sufficient explanatory power to compensate for the remaining unknowns.

Code: 
BA4034
Name: 
BEHAVIORAL FINANCE
Discipline: 
BA (Business)
Type: 
Regular
Level: 
Undergraduate
Credits: 
4
Can be taken twice for credit?: 
No
Pre-requisites: 
(MA1020CCM OR MA1020GE120) AND (BA3010)
Co-requisites: 
None

Learning Outcomes

  1. Students will be able to contrast expected utility theory with prospect theory
  2. Students will be able to explain, and demonstrate using empirical data, the challenges to the efficient market hypothesis
  3. Students will be able to describe how behavioral biases affect the decision-making process
  4. Students will be able to explain the nature, and forecast the consequences, of key behavioral biases of investors
  5. Students will be able to deploy asset pricing models by competently selecting and applying appropriate variables and understanding the contribution of biases

Offering(s)

Term Code Name
Spring 2024 BA4034 BEHAVIORAL FINANCE

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