Behavioural Finance - MAN00035H

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  • Department: The York Management School
  • Credit value: 20 credits
  • Credit level: H
  • Academic year of delivery: 2024-25

Related modules

Pre-requisite modules

Co-requisite modules

  • None

Prohibited combinations

  • None

Module will run

Occurrence Teaching period
A Semester 2 2024-25

Module aims

This module aims to provide the student with an understanding of how human behaviour affects the financial decision making process. Through the examination of the link between several heuristic biases and asset pricing anomalies, students learn alternative approaches to finance that allow for investor psychology and social dynamics.

Module learning outcomes

  • Identify the causes of asset pricing anomalies in the context of investor psychology

  • List and explain the effects of different behavioural biases on the evolution of prices of financial assets.

  • Propose several different behavioural investment strategies

  • Analyse the effects of behavioural biases on corporate finance decisions

Module content

  • What Is Behavioural Finance? (Introduction; Heuristic Biases; Frame Dependence; Inefficient Markets)

  • Individual Investor Psychology(Near/bounded rationality;Myopia;Noise Trading;Self-control;
    Pessimism and Doubt; Disappointment aversion preferences; Overconfidence; Anchoring; Hindsight bias; The disposition effect)

  • Collective investor psychology (Herding; Over-reaction; Competitiveness)

  • Speculative Behaviour (Tulip Mania; Rational Speculative bubbles; Ponzi games; Greater fool theory; Are speculative bubbles possible under rational expectations?; Over optimism; Fads and Fashions; Irrational speculative bubbles; Heterogeneous investors and speculative behaviour; Testing for the presence of speculative bubbles)

  • Behavioural Biases and Asset Pricing (The equity premium puzzle; The volatility puzzle; The overtrading puzzle)

  • Financial markets, financial institutions and causes of behavioural biases (Institutional constraints; Market frictions; Sunspots; Closed-end funds)

  • Trading on psychological effects and behavioural finance trading rules (Technical analysis; Momentum and Contrarian investment styles; Market liquidity; Informational cascades)

Indicative assessment

Task % of module mark
Closed/in-person Exam (Centrally scheduled) 100

Special assessment rules

None

Indicative reassessment

Task % of module mark
Closed/in-person Exam (Centrally scheduled) 100

Module feedback

Feedback will be given in accordance with the University Policy on feedback in the Guide to Assessment as well as in line with the School policy.

Indicative reading

  • Ackert, L.F. & Deaves, R. Behavioral Finance: Psychology, Decision Making and Markets. South-Western (2009).

    Forbes, W. Behavioural Finance. Wiley (2009).

    Montier, J. Behavioural Investing: A Practitioners Guide to Applying Behavioural Finance. Wiley (2007).

    Shefrin, H. Beyond Greed and Fear: Understanding Behavioural Finance and the Psychology of Investing. OUP (2000).

    Shleifer, A. Inefficient Markets: An Introduction to Behavioural Finance. OUP (2000).

    Sutherland, S. Irrationality. Pinter & Martin (2007).

    Taleb, N.N. Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets. Penguin (2007).