Courses

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                                                                         

Overconfidence                                                                                 

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