KU.Campus

Detailed information about the module 
Module title:
Behavioral Finance
Module title (english):
Behavioral Finance
Module number:
82-021-VWLECO17-H-0916
Level:
Bachelor (UNI)
Course of study:
Type:
Modul
Organising faculty/Language Center:
Wirtschaftswissenschaftliche Fakultät
Instructors responsible:
Streich, David
Examiners:
Credit points (ECTS):
5
competencies/skills:
• Behavioral finance uses insights from psychology to understand how human behavior influences the decisions of individual and professional investors, markets, and managers. Some decisions are simple, day-to-day choices, such as how hard we are going to study for the next test, or what brand of soda we are going to buy, but others significantly impact our financial well-being, such as whether we should buy a particular stock, or how we should allocate our money among various investment funds. The purpose of this lecture is to present what we have learned about financial decision-making from behavioral finance research.
• Students will refresh the foundations of modern finance: expected utility theory, asset pricing (CAPM), the efficient market hypothesis, and agency relationships.
• Students will become aware of the inability of these standard tools to account for various paradoxes and anomalies, leading to the genesis of behavioral finance as reflected in prospect theory.
Students will be provided the theoretical foundation of this concept.
• Students will learn the psychological foundations of Behavioral Finance: cognitive limitations and heuristics, overconfidence, and emotion.
• Armed with this psychological background, students will learn how psychology impacts financial decision making at the level of the individual. For instance, the lecture will investigate the extent to which the faulty use of heuristics leads to sub optimal financial decision-making.
• Students will become aware of the behavioral foundations of some central stock-market puzzles. For instance, in 1987 the Dow Jones fell by almost one quarter without any apparent reason. In this context, the global financial crisis will also be discussed.

course content/topics:
- Foundations of Neoclassical Finance
- Expected Utility Theory
- Asset Pricing, Market Efficiency, and Agency Relationships
- Theoretical Foundations of Behavioral Finance
- Prospect Theory
- Framing, and Mental Accounting
- Psychological Foundations of Behavioral Finance
- Heuristics and Biases
- Overconfidence
- 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
- Market Outcomes
- Behavioral Explanations for Anomalies
- Do Behavioral Factors Explain Stock Market Puzzles?
formal requirements of admission:
None
recommended qualifications:
None
Lehr- und Lernformen/Lehrveranstaltungstypen:
- Lecture
- Tutorial
requirements for the attainment of ECTS points:
Gained competences are tested in a written exam (90 minutes)
workload/distribution of ECTS points within the module:
• 28 h = Time of attendance lecture
• 28 h = Time of attendance tutorial
• 32 h = Preparation and postprocessing lecture
• 32 h = Preparation and postprocessing tutorial
• 30 h = Exam preparation
• 150 h = Total workload
calculation of module marks:
Written exam 100 %
teaching/learning method:
compatibility with other courses of study:
• Betriebswirtschaftslehre International B.Sc.
• Betriebswirtschaftslehre M.Sc.
• Digital and Data-Driven Business B.Sc.
Turnus des Angebots:
SS
Beteiligte Fachgebiete:
Bemerkung:
Ackert, Lucy F. and Richard Deaves (2010). Behavioral Finance Psychology, Decision-Making, and Markets. Cengage Learning