2013/2014 KAN-CMF_BECO Behavioural Economics
English Title | |
Behavioural Economics |
Course information |
|
Language | English |
Exam ECTS | 7.5 ECTS |
Type | Mandatory |
Level | Full Degree Master |
Duration | One Quarter |
Course period | Third Quarter |
Time Table | Please see course schedule at e-Campus |
Study board |
Study Board for BSc/MSc in Business Administration and
Philosophy, MSc
|
Course coordinator | |
|
|
Main academic disciplines | |
|
|
Last updated on 08-07-2013 |
Learning objectives | |||||||||||||||||||||
Learning objectives
This course provides students with a critical view on financial economics – standard models and assumptions including of course the idea of rational markets – based on what we know about personal and market behavior; it is an introduction to a critique that takes as its premise that financial decision-making and investor behavior are not necessarily driven by rational considerations but by aspects of personal and market psychology.
|
|||||||||||||||||||||
Examination | |||||||||||||||||||||
|
|||||||||||||||||||||
Course content and structure | |||||||||||||||||||||
Purpose
The purpose of this course is to enable students to understand economic theories of the market in general and financial markets in particular on their own terms while at the same time identifying more philosophical themes related to for example rationality, efficiency, value and pricing inherent in these theories. This double understanding of markets should enable students not only to reflect critically about mainstream economic theory but also articulate this critique on the terms of economic theory itself. In the wider context of the CM(fil.) master, the idea of this course is to activate philosophical thinking from inside economics rather than the other way around. |
|||||||||||||||||||||
Teaching methods | |||||||||||||||||||||
Structure
This course begins by reviewing the foundations of modern finance – to make sense of how psychology impacts individuals and markets it is necessary to take this step back –, its inability to account for various paradoxes and anomalies, and the genesis of behavioral finance. Expected utility and market efficiency are the first topics to be covered and discussed. Philosophical themes covered in this part include rationality, utilitarism (ethics), and empiricism (epistemology). These central theoretical developments have subsequently proved incomplete as individuals’ actual choices violate a number of important assumptions. For example, the assumption of risk aversion proved to be poorly grounded in actual behavior as did market efficiency and the capital assets pricing model. (Social) Psychology provided a number of interesting alternative explanations that naturally call for philosophical scrutiny: Prospect theory, heuristics and biases, overconfidence, and social forces. Philosophical themes include power, emotions and nudging (paternalism). The final part of the course describes how psychological biases have the potential to impact the behavior of managers. Both the abilities of rational managers to take action when markets are believed to reflect irrationality and the possibility that managers are themselves the source of bias are addressed. Here, the philosophical purpose is to abstract what is valid from all realms. Some 'debiasing' strategies will also be covered. |
|||||||||||||||||||||
Expected literature | |||||||||||||||||||||
· Behavioral
Finance (Psychology, Decision-Making, and Markets), 1st edition,
2010. Lucy F. Ackert and Richard Deaves. South-Western, Cengage
Learning.
· A selection of topical papers. |
Last updated on
08-07-2013