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FINN3081: Behavioural Finance
Aims
- The module seeks to:
- Provide students with knowledge and understanding of theoretical and empirical challenges to the efficient market hypothesis.
- Present limits to arbitrage and psychology as key pillars of Behavioural Finance.
- Provide the opportunity for students to critically evaluate relevant theoretical and empirical literature.
- Offer the opportunity to develop key skills.
Content
- Review of the Efficient Markets Hypothesis: a major building block of the modern theory of financial economics.
- Concepts from Psychology (a) Beliefs.
- Concepts from Psychology (b) Preferences.
- Limits to Arbitrage.
- Excess Volatility.
- Noise Trader Risk.
- Social Media.
- Closed End Fund Puzzle.
- Underreaction and Overreaction.
- Excessive Trading.
- Speculative Bubbles.
- Model of Investor Sentiment.
- Equity Premium Puzzle as myopic risk aversion.
- Experimental Methods.
- Collective Behaviour.
Learning Outcomes
Subject-specific Knowledge:
- By the end of this module students should be able to:
- Understand the key concepts and issues in behavioural finance.
- Have practiced skills of problem-solving and critical thinking.
Subject-specific Skills:
- Explain and interpret key implications of theoretical, empirical and experimental literature in Behavioural Finance.
- Construct and present critical evaluations of key academic papers in Behavioural Finance.
Key Skills:
- Appreciate the key theoretical and empirical literature in behavioural finance.
- Examples are provided to demonstrate how students will have the opportunity to develop the following key skills:
- Written Communication by completing formative and summative assignments.
- Group working skills and (video) presentation skills by participation in formative assessments.
- Interpersonal Communication using email to communicate with tutors and other students; discussing concepts and issues in classes with tutors and the student group.
- Oral Presentation by active participation in class discussions and contributing to class presentations.
- Planning and Organising by timely preparation for classes, adhering to deadlines, downloading relevant material and preparing for lectures and assessment.
- Problem Solving by applying the necessary analytical techniques in addressing class problems and preparing assignments.
- Initiative by searching relevant literature and other information in preparation for the formative and summative assessments.
- Computer Literacy by word-processing the assignments; accessing and downloading teaching material from Learn Ultra; using email to communicate with tutors and other students.
Modes of Teaching, Learning and Assessment and how these contribute to the learning outcomes of the module
- Teaching is by lectures, some of which may take the form of experimental sessions and seminars. Learning takes place through attendance at lectures, participation in experiments and preparation for, and participation in seminar classes, and private study.
- Formative assessment is by means of a conference style presentation using video and written report.
- Summative assessment is by means of two written assignments
Teaching Methods and Learning Hours
| Activity | Number | Frequency | Duration | Total/Hours | |
|---|---|---|---|---|---|
| Lectures | 20 | 10 in term 1, 10 in term 2 | 1 hr | 20 | |
| Seminars | 8 | 4 in term 1, 4 in term 2 | 1 hr | 8 | |
| Preparation and Reading | 172 | ||||
| Total | 200 |
Summative Assessment
| Component: Assignment | Component Weighting: 100% | ||
|---|---|---|---|
| Element | Length / duration | Element Weighting | Resit Opportunity |
| Assignment 1 | 1500 words max | 50% | same |
| Assignment 2 | 1500 words max | 50% | same |
Formative Assessment:
One group report and 10-minute presentation