Coming soon
BEHAVIOURAL FINANCE
This course will enable the students to explore the field of Behavioural Finance and use it for better financial decision making
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Course |
Learning outcome (at course level) |
Learning and teaching strategies |
Assessment Strategies |
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Course Code |
Course title |
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24MFM325 |
Behavioural Finance (Theory) |
CO345 Explore the concept of Behavioral Finance and examine behaviour and preferences for decision making CO346 Explore the theories of Behaviuoural Finance and assess the impact of Heuristics and representativeness on investment decisions CO347 Analyze cognitive and emotional biases for decision making CO348 Evaluate the principles and applications of Behavioral Portfolio Theory in understanding investor behavior, Analyze the central tenets of value investing and its evidence, explore the neural processes underlying financial decision-making, CO349 Evaluate various anomalies in financial markets and analyze investor behavior during market bubbles CO350 Contribute effectively in course-specific interaction
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Approach in teaching: Interactive Lectures, Group Discussion, Tutorials, Case Study Learning activities for the students: Self-learning assignments, presentations |
Class test, Semester end examinations, Quiz, Assignments, Presentation |
Introduction: Meaning, nature, scope and history of Behavioural Finance, Comparison between Behavioural Finance and Standard Finance, Behavioural Finance scenario in India Behaviour and Decision Making: Cognitive Bias, Emotional Bias, Concept of bounded rationality, beliefs and heuristics-Preferences: Prospect Theory, Ambiguity aversion, Loss aversion, Framing, Non-consequentialism: Disjunction Effect.
Theories of Behavioural Finance: Asymmetric information, Ego centricity, Human Behavioral Theories.
Heuristics: Familiarity, Ambiguity Aversion Diversification, Functional Fixation Status Quo, Endowment Effect
Representativeness: Innumeracy, Probability matching and conjunction fallacy, Base Rate Neglect, Availability and Salience, Anchoring.
Bias: Interaction amongst biases Outcomes of biases, Dealing with biases, Overcoming the biases and debiasing
Cognitive Biases: Self-Deception, Framing, Overconfidence, Miscalibration, better than average effect, overoptimism, Causes: illusion of knowledge, control, understanding, skill, Self-attribution, Confirmation, Representativeness, Recency.
Emotional Biases: Regret, hindsight, Denial, Loss aversion, Affinity, Self-control.
Behavioural aspects of Investing: Behavioural Portfolio theory, Psychographic models, Sound Investment Philosophy
Value Investing: Central tenets of value investing Evidence and prospects of value investing. Neuro finance: Neural processes during financial decision-making Future of Neuro finance Adaptive Market Hypothesis.
Anomalies: Fundamental anomalies, Accounting Based Anomalies, Calendar Anomalies, Technical anomalies: Value v/s Growth, size, equity premium myopia.
Market Bubbles: Identification and causes, investor behaviour during bubbles, case study of prominent market bubbles/scams.
*Case studies related to entire topics are to be taught.
- Prasanna Chandra, Behavioural Finance, McGraw Hill, 2020, 2nd edition.
- Sujata Kapoor, Jaya Mamta Prasad, Sage, 2019. 5th edition.
Suggested Readings:
- M. M. Sulphey, Behavioural Finance, PHI, 2014, 1st edition.
- Parag Parikh, Value Investing and Behavioural Finance, McGraw Hill, 2009. 2nd edition.
- James Montier, Behavioural Finance: Insights into Irrational Minds and Markets, Wiley Finance,2008.
- Lucy Ackert and Richard Deaves, Understanding Behavioral Finance, Cengage Learning, India Edition2012.
E-resources:
- Asian Journal of Management Cases, http:// sagepub.com
- South Asian Journal of Business and Management Cases, http:// sagepub.com
Journals:
- Journal of Behavioral Finance, Taylor & Francis.
- Journal of Behavioral and Experimental Finance, Elsevier.
- Review of Behavioral Finance, Emerald Publishing
- Review of Behavioral Finance, Wiley Online Library.
