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Semester 1

Behavioural Finance and Market Efficiency (ACCN10026)

Subject

Business Studies

College

CAHSS

Credits

20

Normal Year Taken

3

Delivery Session Year

2023/2024

Pre-requisites

Visiting students must have at least 4 Business Studies courses at grade B or above. This MUST INCLUDE at least one Finance course at intermediate level. This course cannot be taken alongside BUST08003 Principles of Finance or BUST08030 Introduction to Corporate Finance. We will only consider University/College level courses.

Course Summary

This course is designed to introduce students to the basic principles of behavioural finance and its implications for investors in international capital markets, analysts and other market participants.

Course Description

This elective is designed to provide an overview of an exciting new area in finance which takes as its premise that investment decision-making and investor behaviour are not necessarily driven by 'rational' considerations but by aspects of personal and market psychology. Behavioural finance recognises that our abilities to make complex investment decisions are limited, and that we can improve our performance as investors and fund managers by recognising the biases and errors of judgment to which all of us are prone. The elective discusses what we know about the psychology of financial decision-making and explores the behaviour of both individual investors and finance professionals. Are markets really 'efficient'? How can we explain the existence of market anomalies? Outline Content - Is our decision making biased? what is behavioural finance? - Formal overview of investor psychology - Heuristic driven biases; - Other judgement biases, overconfidence and investor performance, selling winners too early and riding losers too long; - Recent advances in behavioural finance; - Emotional Finance; - Introduction to market anomalies; - Value puzzle; - Momentum paradox; - Post-earnings announcement drift; - Corporate events and long horizon returns; - Accruals anomaly, analyst recommendations anomaly; - Behavioural finance versus market efficiency. Student Learning Experience The learning occurs primarily through reading and thinking about the papers or chapters of books recommended and discussion in class. This reading is supported by the programme of ten lectures, in each of which an overview of the topic is presented and the findings of a number of relevant papers are reviewed in some detail. Students are required to write two assessed reports. All students are expected to participate actively in class discussion. Learning takes place in four stages: 1) Prior to each session students are required to complete the reading assignments given 2) During the session the bullet points on the slides will be used to focus the discussion and to help to summarise key issues 3) As the structure of the elective is designed to be cumulative students will be expected to bring their learning and insights from previous sessions to bear on subsequent sessions 4) They will bring together and test out their understanding of the issues discussed in the course during the lectures At the end of each lecture topic there will be a set of questions some of them MCQ as well and feedback will be given each week.

Assessment Information

Written Exam 0%, Coursework 100%, Practical Exam 0%

view the timetable and further details for this course