Behavioural Finance – Practical

Paper Code: 
24DFSG816
Credits: 
2
Contact Hours: 
30.00
Max. Marks: 
100.00
Objective: 

This course will enable students to analyze behavioral phenomena in financial markets, such as herding behavior, stock market bubbles, the impact of financial news, cognitive biases, prospect theory in asset allocation, and behavioral influences in cryptocurrency markets.

 

Course Outcomes: 

Course

Learning outcome

(at course level)

Learning and teaching strategies

Assessment Strategies

Course Code

Course

Title

 

24DFSG 816

Behavioural Finance – Practical (Practical)

 

CO313: Analyse the role of Herding Behaviour in financial markets

CO314: Interpret the relationship between behaviour factors and stock market bubbles

CO315: Demonstrate using empirical data the challenges to the efficient market hypothesis and risk preferences of the investors

CO316: Examine the consequences of key behavioural biases on investment, asset allocation and cryptocurrency market

CO317: Interpret the impact of  behavioural biases on financial decision-making

 CO318: Contribute effectively in course-specific interaction

 

Approach in teaching: Interactive Lectures, Tutorials, Practical cases, Power point presentation.    

 Learning activities for the students:                              Self learning assignments,  Seminar presentation.

CA  test, Semester end examinations, Solving problems in tutorials, Assignments, Presentation.

 

6.00
Unit I: 
Herding Behaviour in Financial Markets

• Investigate the phenomenon of herding behaviour among investors.
• Analyse historical market data to identify periods of heightened herding and study the impact on stock returns.
• Explore different factors such as investor demographics, market conditions, or news events that contribute to herding behaviour.

6.00
Unit II: 
Behavioural Factors in Stock Market Bubbles

• Research the role of behavioral factors in the formation and burst of stock market bubbles.
• Analyse historical data from previous market bubbles (e.g., dot-com bubble, housing bubble) and identify common behavioural patterns and irrational exuberance that contribute to bubble formation.
• Impact of Financial News on Investor Behaviour
• Examine how financial news influences investor behaviour and decision making.
• Analyse news sentiment, frequency, and content related to specific stocks or markets, and study the subsequent investor reaction, such as changes in trading volume, volatility, or returns.

6.00
Unit III: 
Exploring the List of Self-control Questions

• Report/Discussion/Presentation/Survey on the difference between expected utility and prospect theories
• Steps of efficient market hypothesis.

6.00
Unit IV: 
Cognitive Biases in Investment Decision Making

• Report/ Presentation/Survey on the nature of the following behavioral biases: Cognitive Biases in Investment Decision Making

6.00
Unit V: 
Prospect Theory and Asset Allocation/Behavioural Finance and Cryptocurrency

• Apply prospect theory principles to asset allocation strategies.
• Analyse how investors' risk preferences and loss aversion influence their portfolio allocation decisions.
• Compare the performance of traditional portfolio models (e.g., mean-variance optimization) with prospect theory-based models.
• Behavioral Finance and Cryptocurrency Markets: Study the influence of behavioral biases in cryptocurrency markets.
• Analyze market data from different cryptocurrencies and investigate the impact of factors like herding behavior, cognitive biases, and emotional decision making on price volatility and trading volumes

Essential Readings: 

• Chandra, P. (2017), Behavioural Finance, Tata Mc Graw Hill Education, Chennai (India).
• Ackert, Lucy, Richard Deaves (2010), Behavioural Finance; Psychology, Decision Making and Markets, Cengage Learning.
• Forbes, William (2009), Behavioural Finance, Wiley.
• Kahneman, D. and Tversky, A. (2000). Choices, values and frames. New York : Cambridge Univ. Press.
• Shefrin, H. (2002), Beyond Greed and Fear; Understanding Behavioural Finance and Psychology of investing. New York; Oxford University Press.

References: 

Suggested Readings:
• Thaler, R. (1993). Advances in Behavioral Finance. Vol. I. New York,Russell Sage Foundation.
• Thaler, R. (2005). Advances in Behavioural Finance. Vol. II. New York; Princeton University Press.
• Shleifer, A. (2000). Inefficient markets; An introduction to Behavioural Finance. Oxford Univ. Press.
• Ackert, Deaves. Behavioral Finance: Psychology, Decision-Making, and Markets. Cengage Learning; 1 edition, 2010.
• Shleifer, Andrei (2000). Inefficient Markets: An Introduction to Behavioral Finance. Oxford, UK: Oxford University Press.
• Hersh Shefrin, (2000) Beyond Greed and Fear, Harvard Business School Press.

E-Contents:
• World EBook Library
• World EBook Library
• https://www.wallstreetmojo.com/behavioral-finance/
• https://www.accaglobal.com/gb/en/student/exam-support-resources/fundamen....

Reference Journals:
• Review of Behavioural Finance, Emerald Publishing
• Journal of Behavioural Finance, Institute of Behavioural Finance, Plano, TX 75093

Academic Year: 
2024-2025
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