MN50679: Behavioural finance
[Page last updated: 15 October 2020]
 Academic Year: | 2020/1 |
| Owning Department/School: | School of Management |
| Credits: | 6 [equivalent to 12 CATS credits] |
| Notional Study Hours: | 120 |
| Level: | Masters UG & PG (FHEQ level 7) |
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| Assessment Summary: | EX 100% |
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| Description: | Aims: The aim of this unit is to enable students to explore, theoretically and practically, the new and emerging area of behavioural finance. Behavioural finance builds on existing finance theories and models by incorporating the effect of managerial/investor psychology and emotions. Learning Outcomes: At the end of the unit students will be expected to be able to: * Understand, and discuss, the development from the standard economic theories of financial markets and corporate finance to those embodied in behavioural finance and behavioural corporate finance * Analyse the psychological biases that can affect investors and corporate managers * Analyse the differences in the inefficiencies in financial markets and corporate finance that result from psychological biases, compared with those arising from the agency theories of standard corporate finance * Analyse the effects of investor biases on financial markets and corporate finance decision making * Analyse the effects of managerial biases on corporate finance decisions, such as investment appraisal, capital structure, dividend policy, mergers and acquisitions * Examine theoretical and empirical models relating to managerial and investor psychological biases. Skills: Intellectual skills: * Creative thinking (F) * Analysing and comparing various theoretical and practical financial and psychological frameworks (T, F, A) Practical skills: * Understanding the effects of psychology and emotions on investor and manager financial behaviour (T, F, A) * Developing strategies to overcome biased financial decision-making (T, F, A) * Manage imperfect humans in a financial decision-making context (F) Transferable skills: * Understanding the effects of psychology and emotions on investor and manager behaviour in a general context (F) * Developing strategies to overcome biased decision-making in a general context (F) * Manage imperfect humans in a general decision-making context (F) Content: The unit will examine, in a behavioural finance framework, issues such as the effects of a) investor psychology and emotions on financial market investing and behaviour and b) managerial psychology on corporate financing decisions, such as investment appraisal, capital structure, dividends and mergers and acquisitions. In addition to background theory, the unit will make use of practical examples and case studies. The unit will cover some or all of the following: * Introduction to human psychological biases * Prospect Theory, Framing, Mental Accounting * Challenges to Market Efficiency * Heuristics and Biases and the Implications for Financial Decision Making * Investor Overconfidence and the Implications for Financial Decision Making * Individual Investors and the Force of Emotion * Social Forces and the implications for financial markets * Behavioural explanations for financial market anomalies * The effect of managerial and investor biases on investment appraisal decisions * The effect of managerial and investor biases on Capital Structure decisions * The effect of managerial and investor biases on dividend decisions * The effect of managerial and investor biases on merger decisions. |
| Programme availability: |
MN50679 is Optional on the following programmes:School of Management
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