Behavioral finance has gained enormous importance over the past several years. The previously held economic assumption that people always make rational choices has become largely unproven in practice. The course provides an introduction into the study of the effects of social, cognitive, and emotional factors on the economic decisions of individuals and institutions. Psychological biases inhibit the individual’s ability to make good investment decisions. This has several consequences on market prices, returns, and the resource allocation decisions made by indiviudual and corporate decision-makers.
We shall discuss the major themes which are currently prevalent in behavioral finance:
Students will be provided with an understanding of the main reasons behind seemingly rational or irrational business decisions. By learning about one’s psychological biases, it is easier to overcome them and increase the quality of decision-making.
Students will gain an understanding of how individuals actually make financial decisions (descriptive) and guidance on how to improve financial decision making in themselves and others.
During class and assignments, students will be expected to cooperate and work in teams. This presupposes being able to find and accept team roles and to deliver a timely and efficient product which all team members contributed to.
The assessment for the course comprises of 3 parts, with their respective weights detailed below:
25% class attendance, seminar preparation, and class participation
50% essay paper and class presentation
25% exam and minute paper
Grading is based on the total score in line with standard grading patterns at CEU.
Essay paper and presentation will be divided between respective students where you will be expected to discuss and address the questions prior to each class session. Students present their discussions/findings/calculations during the seminar sessions. Please check the moodle site for further information.