Course overview
This course aims to provide learners with insights into behavioural theories of finance and financial decision-making, comparing and contrasting these theories with those of mainstream (modern) finance theory. One aspect of this is by demonstrating how “real” investors and markets do not always correspond to the “rational” agents and outcomes described under mainstream finance theory. By drawing on both simulated trading experiments and relevant literature, it provides an understanding of classical (‘economically rational’) versus behavioural (‘partially rational’ or ‘irrational’) theories and explanations of financial decision-making and outcomes, extending learners’ knowledge of finance and their ability to critically reflect upon and mitigate against biases in making informed trading and investment decisions.
Course learning outcomes
- Demonstrate advanced knowledge of the behavioural biases, heuristics, and framing effects that impede maximising the value derived from corporate financial and investment decisions
- Critically evaluate the impacts of both individual financial decision-making limitations and behavioural biases on investment outcomes in financial markets
- Determine the relevant issues that arise in comparisons between efficient ('economically rational') markets and less understood but more realistic behavioural ('partially rational' or 'irrational') markets
- Assemble a set of strategies that educated investors and corporate decision makers can utilise to overcome these behavioural biases, heuristics, and framing effects to improve their corporate financial and investment decisions