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Indiana University Bloomington

Department of Finance

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U.S. News & World Report ranked our undergraduate finance program #10 out of all universities in the nation in 2013.

  1. F419
    Behavioral Finance
    • 15-weeks
    • 3 credits
    • Prerequisite: (F303 or F304) and F305

    How human psychology influences the decisions of investors, markets, and managers. Learn how to avoid systematic investment errors, critically evaluate evidence of apparent anomalies in financial markets, and how to escape decision traps that afflict corporate managers.

    Part I: Conventional Finance, Prospect Theory, and Market Efficiency

    Introduction to Behavioral Finance

    Rational Agent Foundations: Expected Utility Theory                     

    Review: Asset Pricing, Market Efficiency, and Agency Relationships   

    Prospect Theory, Framing, and Metal Accounting                               

    Challenges to Market Efficiency                                                                                               

    Part II: Behavioral Science Foundations

    Heuristics and Biases                                                                         


    Emotional Foundations                                                                          

    Part III: Investor Behavior

    Implications of Heuristics and Biases for Financial Decision-making     

    Implications of Overconfidence for Financial Decision-making             

    Individual Investors and the Force of Emotion                                       

    Midterm 1

    Part IV: Social Forces

    Social Forces: Selfishness or Altruism?                                               

    Social Forces at Work: The Collapse of an American Corporation       

    Part V: Market Outcomes

    Behavioral Explanations for Anomalies                                                

    Do Behavioral Factors Explain Stock Market Puzzles?                       

    Part VI: Corporate Finance

    Rational Managers and Irrational Investors                                           

    Behavioral Corporate Finance and Managerial Decision Making           

    Part VII: Retirement, Pensions, Education, Debiasing, and Client Management

    Understanding Private Saving Behavior and Improving DC Pensions     

    Debiasing, Education, and Client Management                                  

    Part VIII: Money Management

    Behavioral Investing                                                                             

    Midterm 2

    Part IX: Active Investment

    Active Investment Strategies: What they are doing and why it might work

    Active Investment Strategies: Evidence that Active Management works

    Investment Philosophies: Momentum of Common Stock Prices

    Investment Philosophies: Value and Growth Investing

    Sustainable Investing                 

    Group Presentations