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Unit information: Behavioural Finance in 2014/15

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Unit name Behavioural Finance
Unit code EFIMM0016
Credit points 15
Level of study M/7
Teaching block(s) Teaching Block 2 (weeks 13 - 24)
Unit director
Open unit status Not open
Pre-requisites

None

Co-requisites

None

School/department School of Accounting and Finance
Faculty Faculty of Social Sciences and Law

Description including Unit Aims

The purpose of the module is to provide an understanding of psychological biases which affect financial decision-making.

The first part of the module will give a brief introduction to the general models in Behavioural Finance (Prospect Theory, Ambiguity Aversion and Herding).

In the second half of the module the focus will be on implications of behavioural biases for Corporate Finance. For example:

1. Security Issuance and Market timing

2. Why firms issue dividends despite negative tax implications?

3. Wealth Destruction in Mergers and Acquisitions arising from managerial overconfidence

Intended Learning Outcomes

By the end of the module a student is expected to appreciate the role of investor behaviour and biases in financial decision making.

Teaching Information

Ten 2-hour lectures. Five 1-hour seminars.

Assessment Information

2-hour exam (80%) (Mix of mathematical and essay-type questions)

The mathematical questions will assess the understanding of the inner workings of the models that are taught in the module.

Essay-type questions will assess breadth of knowledge (from readings which are assigned over and above lecture notes).

Class Presentations (20%)

Papers presented in these workshops will be examinable.

Reading and References

Behavioural Finance: Psychology of Decision Making and Markets, Ackert and Deaves, 2009

Behavioural Corporate Finance: Decisions that Create Value, Shefrin, 2007

Applied Corporate Finance, Damodaran, 2011

A Random Walk Down Wall Street: the Time-Tested Strategy for Successful Investing, Burton and Malkiel, 2007

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