BEHAVIORAL FINANCE (BA5034)

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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: 
BA5034
Name: 
BEHAVIORAL FINANCE
Discipline: 
BA (Business)
Type: 
Regular
Level: 
Graduate
Credits: 
2
Can be taken twice for credit?: 
No
Pre-requisites: 
Major=MSc: International Management OR Major=MSc: Int'l Mgmt (NGO & Mission-Based Track) OR Major=MSc: Int'l Mgmt (Sustainability Systems Track) OR Major=MSc: Strategic Brand Management
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 the behavioral 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 produce a decision-oriented presentation that synthesizes complex information for an executive-level generalist audience

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