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BEHAVIOURAL FINANCE
Course Outcomes (Cos):
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Learning outcome (at course level) |
Learning and teaching strategies |
Assessment Strategies |
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Upon successful completion of this course, the student will be able to: CO251 Differentiate between behavioural finance and rational finance CO252 Critically evaluate Prospect theory and regret theory CO253 Examine heuristics and biases in investment decision making CO254 Explain the nature and forecast the consequences of key behavioural biases of investors CO255 Interpret the relationship between personality traits and risk attitude of the investors |
Approach in teaching: Interactive Lectures, Discussion, Tutorials, Reading assignments, Team teaching |
Class test, Semester end examinations, Quiz, Assignments, paper presentations, case study, final research paper |
Investment: Meaning of Investment, Avenues of Investment, Factors affecting Investment
Introduction to Behaviour Finance: Meaning, Scope, Objective, Significance, Rationality of Studying Behavioural Finance.
Foundation of Rational Finance: Expected utility theory, Modern portfolio theory, Capital asset pricing model (CAPM); Efficient markets hypothesis; Agency theory
Comparison of Behavioural Finance with Rational Finance
Heuristics and Biases: Concept, Working of human mind-the two systems; Familiarity and related heuristics; Representativeness and related biases; Anchoring; Irrationality and adaptation; Hyperbolic discounting.
Prospect Theory and Regret Theory
Prospect Theory: Model, Applications, Limitations and Extension and Relevance of Prospect theory in the area of Finance
Regret Theory: Fear of regret in investment decisions, Anticipatory Regret, Minimizing fear of Regret
Behaviour Biases and Their Impact on Investment Decision
Overconfidence, Representativeness, Anchoring and adjustment, cognitive dissonance, availability biases, self-attrition, Herd mentality, illusion of control, conversation, ambiguity aversion, endowment, self-control, optimism, confirmation, hindsight biases, Recency Bias, Framing Bias Status quo
Personality Traits and Risk Attitude
• Systematic Approach of using Behavioural Factors in Corporate Decision Making
• Neurophysiology of Risk Taking
• Personality Trails and Risk Attitudes in Different Domains (Models)
SUGGESTED TEXT BOOKS:
• Chandra, P. (2017), Behavioural Finance, Tata Mc Graw Hill Education, Chennai (India).
• Singh Ranjit (2019), Behavioural Finance, PHI Learning Pvt Ltd, New Delhi
• Kapoor, Sujata.Prosad,Jaya Mamta.(2019) Behavioural Finance, SAGE Publications India Pvt Ltd, New Delhi; First Edition
• Parag Parakh, (2017) Value Investment and Behavioural Finance,McGraw Hill Education; First Edition McGraw Hill Education (India) Private LimitedNoida – 201 301
• 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.
SUGGESTED REFERENCE BOOKS:
• 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-RESOURCES:
• 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
