Module ECON3361: Behavioural Finance

Department: Economics and Finance

ECON3361: Behavioural Finance

Prerequisites

• Corporate Finance

Corequisites

• None

Excluded Combination of Modules

• None

Aims

• The module seeks to:
• Provide students with knowledge and understanding of theoretical and empirical challenges to the efficient markets hypothesis
• Present limits to arbitrage and psychology as key pillars of Behavioural Finance
• Provide the opportunity for students to critically evaluate relevant theoretical and empirical literature
• Offer the opportunity to develop key skills

Content

• Review of the Efficient Markets Hypothesis: a major building block of the modern theory of financial economics
• Limits to Arbitrage
• Concepts from Psychology: Beliefs and Preferences
• Excess Volatility
• Noise Trader Risk
• Closed End Fund Puzzle
• Underreaction and Overreaction
• Excessive Trading
• Speculative Bubbles
• Model of Investor Sentiment
• Equity Premium Puzzle as myopic risk aversion
• The Future of Behavioural Finance

Learning Outcomes

• By the end of this module students should be able to:
• Understand the key concepts and issues in behavioural finance
• Appreciate the key theoretical and empirical literature in behavioural finance
• Have practiced skills of problem-solving and critical thinking.

• Explain and interpret key implications of theoretical and empirical literature in Behavioural Finance
• Construct and present critical evaluations of key academic papers in Behavioural Finance.

• Examples are provided to demonstrate how students will have the opportunity to develop the following key skills:
• Written Communication – by completing formative and summative assignments
• Interpersonal Communication – using email to communicate with tutors and other students; discussing concepts and issues in classes with tutors and the student group
• Oral Presentation – by active participation in class discussions and contributing to class presentations
• Planning and Organising – by timely preparation for classes, adhering to deadlines, downloading relevant material and preparing for lectures and assessment.
• Problem Solving – by applying the necessary analytical techniques in addressing class problems and preparing assignments
• Initiative – by searching relevant literature and other information in preparation for the formative and summative assessments
• Computer Literacy – by word-processing the assignments; accessing and downloading teaching material from DUO; using email to communicate with tutors and other students

Modes of Teaching, Learning and Assessment and how these contribute to the learning outcomes of the module

• Teaching is by lectures and seminars. Learning takes place through attendance at lectures, preparation for and participation in seminar classes, and private study. Formative assessment is by means of a written assignment. Summative assessment is by means of two written assignments.

Teaching Methods and Learning Hours

Summative Assessment

Formative Assessment:

One group report and 10-minute filmed presentation.

■ Attendance at all activities marked with this symbol will be monitored. Students who fail to attend these activities, or to complete the summative or formative assessment specified above, will be subject to the procedures defined in the University's General Regulation V, and may be required to leave the University