Behavioural Finance
| Module title | Behavioural Finance |
|---|---|
| Module code | BEEM157 |
| Academic year | 2024/5 |
| Credits | 15 |
| Module staff | Dr Pauline Vorjohann (Convenor) |
| Duration: Term | 1 | 2 | 3 |
|---|---|---|---|
| Duration: Weeks | 11 | 0 | 0 |
Module description
The efficient markets hypothesis has been the central proposition of finance since the 1970s. Since then, disruptive events like the rise and fall of the dot-com bubble and the global financial crisis have shed substantive doubt on this hypothesis. The field of behavioural finance relaxes the assumption of fully rational investors and incorporates insights from psychology to better understand investor behaviour. We will discuss empirical challenges of the efficient markets hypothesis and provide an overview of behavioural theories that set out to explain commonly observed deviations.
Module aims - intentions of the module
The aim of this module is to expand and enrich students’ knowledge of finance from a behavioural perspective. It provides students with the ability to question classical finance models in an informed and well-grounded manner. It does so by first developing a deep understanding of the classical models and their underlying assumptions, moving on to how they are challenged by empirical evidence, and finally showing how theories from behavioural economics can help to predict and understand real-world behaviour within financial markets.
Intended Learning Outcomes (ILOs)
ILO: Module-specific skills
On successfully completing the module you will be able to...
- 1. Critically evaluate assumptions and hypotheses of classical models of investor behaviour in finance
- 2. Discuss empirical observations that challenge classical finance theory
- 3. Explain and critically evaluate behavioural models of investor behaviour and their predictions
ILO: Discipline-specific skills
On successfully completing the module you will be able to...
- 4. Critically evaluate the underlying assumptions of economic theories and discuss how these assumptions are tested
- 5. Relate behavioural/psychological insights to classical economic theory
ILO: Personal and key skills
On successfully completing the module you will be able to...
- 6. Critically evaluate research articles in a systematic and constructive manner
- 7. Engage in informed and well-reasoned discussion
- 8. Produce original high quality technical written work
Syllabus plan
- Efficient markets hypothesis
- Equity premium puzzle
- Risk-taking and portfolio evaluation
- Value investment
- Volatility of stock prices
- Noise trading
- Investor sentiment
- The limits of arbitrage
Learning activities and teaching methods (given in hours of study time)
| Scheduled Learning and Teaching Activities | Guided independent study | Placement / study abroad |
|---|---|---|
| 27 | 123 | 0 |
Details of learning activities and teaching methods
| Category | Hours of study time | Description |
|---|---|---|
| Scheduled learning and teaching activity | 22 | Lectures |
| Scheduled learning and teaching activity | 5 | Tutorials |
| Guided independent study | 123 | Problem sets, readings and assignments |
Formative assessment
| Form of assessment | Size of the assessment (eg length / duration) | ILOs assessed | Feedback method |
|---|---|---|---|
| Practice exercises | 1 hour | 1-8 | Oral and written |
Summative assessment (% of credit)
| Coursework | Written exams | Practical exams |
|---|---|---|
| 40 | 60 | 0 |
Details of summative assessment
| Form of assessment | % of credit | Size of the assessment (eg length / duration) | ILOs assessed | Feedback method |
|---|---|---|---|---|
| Assignment | 40 | Max. 2000 words | 1-8 | Written |
| Final exam | 60 | 90 minutes | 1-7 | Written |
Details of re-assessment (where required by referral or deferral)
| Original form of assessment | Form of re-assessment | ILOs re-assessed | Timescale for re-assessment |
|---|---|---|---|
| Assignment (40%) | Assignment (Max. 2000 words, 40%) | 1-8 | Referral/deferral period |
| Final exam (60%) | Exam (90 minutes, 60%) | 1-7 | Referral/deferral period |
Re-assessment notes
Deferral – if you miss an assessment for certificated reasons judged acceptable by the Mitigation Committee, you will normally be either deferred in the assessment or an extension may be granted. The mark given for a re-assessment taken as a result of deferral will not be capped and will be treated as it would be if it were your first attempt at the assessment.
Referral – if you have failed the module overall (i.e., a final overall module mark of less than 50%) you will be required to redo the assessment(s) as necessary. If you are successful on referral, your overall module mark will be capped at 50%.
Indicative learning resources - Basic reading
Basic reading:
- Ackert, L. F. and Deaves, R. 2010, Behavioral Finance – Psychology, Decision-Making, and Markets, South-Western, Cengage Learning
- Thaler, R. H. 2005, Advances in Behavioral Finance Vol. II, Russell Sage Foundation and Princeton University Press
- Shleifer, A. 2000. Inefficient Markets – An Introduction to Behavioural Finance, Oxford University Press
- Hirshleifer, D. 2015, Behavioral finance. Annual Review of Financial Economics, 7, 133-159
Indicative learning resources - Web based and electronic resources
Web-based and electronic resources:
- ELE – College to provide hyperlink to appropriate pages
Indicative learning resources - Other resources
Other resources:
- Thaler, R. H. 2015, Misbehaving – The Making of Behavioural Economics, Penguin Random House
| Credit value | 15 |
|---|---|
| Module ECTS | 7.5 |
| Module pre-requisites | None |
| Module co-requisites | None |
| NQF level (module) | 7 |
| Available as distance learning? | No |
| Origin date | 09/02/2022 |
| Last revision date | 31/05/2023 |
