Durham University
Programme and Module Handbook

Postgraduate Programme and Module Handbook 2023-2024 (archived)

Module FINN43615: Behavioural and Neurofinance

Department: Finance

FINN43615: Behavioural and Neurofinance

Type Tied Level 4 Credits 15 Availability Available in 2023/24 Module Cap None.
Tied to N3K409
Tied to N3K709
Tied to N3K309
Tied to N3K209
Tied to N3K109
Tied to N3KC09


  • None


  • None

Excluded Combination of Modules

  • None


  • Provide students with knowledge and understanding of theoretical and empirical limitations of and challenges to the efficient market hypothesis, from both a behavioural and a neuroscientific perspective;
  • Present the psychological foundations of behavioural finance and how they impact upon investors’ rationality and arbitrage;
  • Illustrate the behavioural background surrounding "animal spirits" in markets and how these can foment bubbles and crashes;
  • Demonstrate how neurofinance (through recourse to neuroscience) can help explain the roots of investors' behaviour documented in behavioural finance;
  • Outline the neuroscientific effects of genetics, endocrinal factors and health/brain conditions on the risk-return perception and valuations of assets.


  • The Neoclassical paradigm and its limitations in real-life finance;
  • Bounded rationality, biases and heuristics;
  • Prospect theory: using reference points in decision-making;
  • Noise trading and limits to arbitrage;
  • Collective investors’ behaviour: herding and bubbles/crashes;
  • Introducing neurofinance: brain anatomy, neuroscientific techniques and the role of emotions;
  • The 4-System model of the human brain: controlled, cognitive, automatic and affective processes – and their interactions;
  • Reward-pursuit and loss-avoidance: how the brain encodes values, rewards and losses - and how neuroscience helps explain behavioural biases and heuristics;
  • Risk-versus-ambiguity: brain footprint and empirical evidence;
  • Biological variations and their impact on brain’s responses to decisions: the effects of endocrinal variations, health conditions/treatments, genetics and brain damage conditions.

Learning Outcomes

Subject-specific Knowledge:
  • On completion of this module, students should have:
  • knowledge of how human behaviour is prone to sub-optimal choices;
  • awareness of key neural roots of this behaviour;
  • a good command of collective investors’ mentality, its sources, types and consequences;
  • knowledge of how neurofinance evidence can help inform decision-making and be of relevance to the finance industry (e.g., based on how specific neuroscientific features help impact investment decisions);
  • a keen appreciation of the role of the unconscious, both behaviourally and neuroscientifically, in choices.
Subject-specific Skills:
  • On completion of this module, students should have:
  • the ability to identify biases and heuristics in choices/decisions and, hence greater awareness of potential pitfalls involved in the decision-making process;
  • the ability to approach real-life financial decisions with greater structure and less overconfidence, i.e., improve their own investment behaviour/performance;
  • the ability to use their understanding of behavioural/neurofinance to analyse and – where possible, predict – the behaviour of markets/other investors;
  • the ability to use their understanding of behavioural/neurofinance to develop a more multifaceted approach to the complexity of capital market.
Key Skills:
  • By showcasing how behavioural/neural factors can lead to versatile outcomes in day-to-day capital market dynamics, this module will help enhance students’ resilience and adaptability for their careers in securities’ markets.
  • Independent learning within a defined framework at an advanced, cross-disciplinary level;
  • Cognitive skills of critical thinking, analysis and synthesis;
  • Self-awareness, openness and sensitivity to diversity in terms of knowledge-generation via the appreciation of inputs from non-finance disciplines;
  • Effective written communication skills;
  • The ability to seek out and use relevant data sources, including electronic and bibliographic sources.

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

  • Lectures convey the subject-specific knowledge and introduce key concepts and their applications/empirical evidence to students;
  • Seminars enable students to consolidate, extend and apply this knowledge through exchanging views and ideas, in an interactive, participation-fostering environment, with the purpose of helping them hone skills relevant to the module’s subject-specific context.
  • Summative assessment through assignment will test students’ knowledge and understanding of the subject-matter and their use of critical judgment and problem-solving and analytical skills.

Teaching Methods and Learning Hours

Activity Number Frequency Duration Total/Hours
Lectures 10 1 per week 2 hours 20
Seminars 5 1 per fortnight 1 hour 5
Preparation and Reading 125
Total 150

Summative Assessment

Component: Individual Assignment Component Weighting: 100%
Element Length / duration Element Weighting Resit Opportunity
Individual Assignment 2500 words (max) 100% same

Formative Assessment:

Answers prepared by students to pre-assigned questions that are presented and discussed in seminars.

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