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2020/2021  BA-BHAAI1085U  Behavioral Economics and Finance

English Title
Behavioral Economics and Finance

Course information

Language English
Course ECTS 7.5 ECTS
Type Elective
Level Bachelor
Duration Summer
Start time of the course Summer
Timetable Course schedule will be posted at calendar.cbs.dk
Max. participants 120
Study board
Study Board for BSc in Economics and Business Administration
Course coordinator
  • Herwig Pilaj - Department of Accounting (AA)
For academic questions related to the course, please contact instructor:
Dr. Herwig Pilaj, Karl-Franzens-University Graz, herwig.pilaj@uni-graz.at
Main academic disciplines
  • Finance
  • Business psychology
  • Economics
Teaching methods
  • Online teaching
Last updated on 21/01/2021

Relevant links

Learning objectives
To achieve the grade 12, students should meet the following learning objectives with no or only minor mistakes or errors:
  • Explain and employ the terms, tools and concepts used in behavioral economics and finance.
  • Demonstrate an understanding of the philosophy and the principles underlying the field of bounded rationality and behavioral economics.
  • Discuss the behavioral biases covered in the course with regard to their choice architecture, current state of research and practical relevance.
  • Understand and apply the basic principles of economic experiments.
  • Critically reflect on their own personality traits, bounded rationality and proneness to behavioral biases.
  • Identify and analyse specific ways in which they can improve choice architecture to improve their own and others' financial decision-making.
Course prerequisites
Behavioral Economics and Finance:
Exam ECTS 7.5
Examination form Home assignment - written product
Individual or group exam Individual exam
Size of written product Max. 15 pages
Max 15 pages
Assignment type Project
Duration Written product to be submitted on specified date and time.
Grading scale 7-point grading scale
Examiner(s) One internal examiner
Exam period Summer, Ordinary exam: Home Assignment: 22 June-30 July 2021. Please note that exam will start on the first teaching day and will run in parallel with the course.
Retake exam: 72-hour home assignment: 27 – 30 September 2021 – for all ISUP courses simultaneously
3rd attempt (2nd retake) exam: 72-hour home assignment: 22 – 25 November 2021 – for all ISUP courses simultaneously

Exam schedules are/will be available on https:/​/​www.cbs.dk/​uddannelse/​international-summer-university-programme-isup/​courses-and-exams
Make-up exam/re-exam
Same examination form as the ordinary exam
Retake exam: 72-hour home assignment, max. 10 pages, new exam question
Exam form for 3rd attempt (2nd retake): 72-hour home assignment, max. 10 pages, new exam question
Course content, structure and pedagogical approach

Course content:

In this course, we will examine how investors - and you - predictably and repeatedly make mistakes in financial decision-making. Using insights from psychology, neurosciences and experimental economics, developed by Nobel laureates like Daniel Kahneman, Richard Thaler and Vernon Smith, we will explore the origins as well as the consequences of such deviations from rational decision-making. 
By participating in several interactive mini-experiments, students will have the chance to experience their own proneness to behavioral biases and to reflect on their own (bounded) rationality and personality traits. 
As a theoretical foundation, we will cover economic theories of decision making under risk and discuss experimental research on several behavioral biases. We will consider how predictions of economic behavior differ when simplifying assumptions in economic models are replaced with psychologically more realistic assumptions based on empirical observations from the lab and from the field. 
Applying theory to practice, we will consider how understanding the functioning of the human mind may allow us to design a better world – in particular, in the field of finance (e.g. better stock markets, retirement and healthcare systems, financial consulting etc.)


Course structure:

Preliminary assignment: Please read the below readings and watch the video clips for the first week [see expected literature]. Reflect on what is meant by behavioral economics / behavioral finance and in which ways it corresponds to, contradicts or complements traditional economics / finance.  How rational are you in your financial decision-making, on a scale ranging from 0 - Homer Simpson to 10 - Mr. Spock? Are you stable in your (ir)rationality, or does it depend on identifiable factors and circumstances? Which ones? What do you think of nudging as a tool to improve financial decision-making? Come to class prepared to discuss these issues. 
Class 1: Introduction: Bounded rationality in finance and beyond 
Class 2: Economic experiments 
Class 3: Foundations I: Homo economicus and Expected Utility Theory 
Class 4: Foundations II: Homo sapiens and Prospect Theory 
Class 5: Measuring and reflecting on personality traits 
Class 6: Behavioral biases in finance I 
Feedback activity: 
Class 7: Behavioral biases in finance II 
Class 8: Financial markets, anomalies and market efficiency 
Class 9: Applying behavioral insights to improve financial decision-making I 
Class 10: Applying behavioral insights to improve financial decision-making II 
Class 11: Wrap up, discussion of mini-projects 

Description of the teaching methods
This year all courses are taught digitally over the Internet. Instructors will apply direct/live teaching through a link (like Skype, Team, Zoom). In some courses, pre-recorded material will also be used.
Feedback during the teaching period
Students will turn in their research question and proposed mini-project for feedback from the instructor. Instructor will provide feedback as to whether the student is on the right track to meet the course objectives.
Student workload
Preliminary assignment 20 hours
Classroom attendance 33 hours
Preparation 126 hours
Feedback activity 7 hours
Examination 20 hours
Further Information

Preliminary Assignment: To help students get maximum value from ISUP courses, instructors provide a reading or a small number of readings or video clips to be read or viewed before the start of classes with a related task scheduled for class 1 in order to 'jump-start' the learning process.


Course timetable is/will be available on https://www.cbs.dk/uddannelse/international-summer-university-programme-isup/courses-and-exams


We reserve the right to cancel the course if we do not get enough applications. This will be communicated on https://www.cbs.dk/uddannelse/international-summer-university-programme-isup/courses-and-exams in  March 2021.

Expected literature

Mandatory readings:

For the preliminary assignment: 
• Thaler, R. H., Sunstein, C. R. (2009): Nudge: Improving Decisions About Health, Wealth and Happiness, Penguin. 
• Video clip: Dan Ariely - Are we in control of our own decisions? Link: https:/​/​www.youtube.com/​watch?v=9X68dm92HVI 
• Video clip: Daniel Kahneman - Why We Make Bad Decisions About Money (And What We Can Do About It), Link: https:/​/​www.youtube.com/​watch?v=Kpev-Lb0EAg 
• Video clip: Richard Thaler - The Behavioralizing of Economics, Link: https:/​/​www.youtube.com/​watch?v=D9Uk-YsjQsI 
For the course: 
• Ackert, L. F., Deaves R. (2010): Behavioral Finance: Psychology, Decision-Making and Markets, Cengage Learning. 
• Kahneman, D., (2012): Thinking, Fast and Slow, Penguin. 


Additional relevant readings:

will be provided online

Last updated on 21/01/2021