Behavioural finance has since the 1980s emerged as a new paradigm within finance. On one hand it rejects crucial tenets of mainstream finance such as the Efficient Market Hypothesis (EMH) on the basis that agents are less than fully rational and that arbitrage fails to eliminate mispricing. Instead it identifies market anomalies or regularities that are at odds with the EMH. It uses ideas from cognitive psychology and aspects of imperfect arbitrage to explain these.
Module Aims
* To provide alternative advanced theoretical models in finance to those that are based on the efficient market hypothesis
* To understand how key cognitive biases and limits to arbitrage are introduced in advanced behavioural models of investment behaviour and asset prices
* To examine the application of advanced concepts in behavioural finance to real world issues such as mergers and acquisitions and investment strategies.
Learning Outcomes
On successful completion of the module, students will be able to:
* Understand the implications of psychological biases and of limits to arbitrage for financial markets and asset prices
* Understand the differences between behavioural and traditional explanations of anomalies in financial markets
* Be familiar with the literatures in both empirical and theoretical developments of behavioural finance
* Evaluate the theoretical and empirical evidence for behavioural models and hypotheses.
Skills for Your Professional Life (Transferable Skills)
The module will help you with the following transferable skills:
(a) Understanding of practical investment decisions including those relating to pension choices and investment styles such as value investing.
(b) Ability to interpret empirical statistical and econometric research results, including simulation results, within the context of behavioural models.
Module Aims
* To provide alternative advanced theoretical models in finance to those that are based on the efficient market hypothesis
* To understand how key cognitive biases and limits to arbitrage are introduced in advanced behavioural models of investment behaviour and asset prices
* To examine the application of advanced concepts in behavioural finance to real world issues such as mergers and acquisitions and investment strategies.
Learning Outcomes
On successful completion of the module, students will be able to:
* Understand the implications of psychological biases and of limits to arbitrage for financial markets and asset prices
* Understand the differences between behavioural and traditional explanations of anomalies in financial markets
* Be familiar with the literatures in both empirical and theoretical developments of behavioural finance
* Evaluate the theoretical and empirical evidence for behavioural models and hypotheses.
Skills for Your Professional Life (Transferable Skills)
The module will help you with the following transferable skills:
(a) Understanding of practical investment decisions including those relating to pension choices and investment styles such as value investing.
(b) Ability to interpret empirical statistical and econometric research results, including simulation results, within the context of behavioural models.
- Module Supervisor: Vivek Nawosah
Category: Finance