2024/2025 DIP-DHDVV2001U Behavioural Finance
English Title | |
Behavioural Finance |
Course information |
|
Language | English |
Course ECTS | 5 ECTS |
Type | Elective |
Level | Graduate Diploma |
Duration | One Semester |
Start time of the course | Autumn |
Timetable | Course schedule will be posted at calendar.cbs.dk |
Max. participants | 50 |
Study board |
Study Board for Graduate Diploma in Business Administration
(part 2)
|
Course coordinator | |
|
|
Study Administration for HDFR: hdfr@cbs.dk | |
Main academic disciplines | |
|
|
Teaching methods | |
|
|
Last updated on 18-03-2024 |
Relevant links |
Learning objectives | ||||||||||||||||||||||||||||||
-Apply psychological concepts to financial
markets, financial decision-making and new problems inside and
outside of the finance industry.
-Identifying biases in financial and economic decision-making and where they come from. -Study behavioral finance tools that can help people make better financial decisions. The course will provide students with an understanding of how human psychology leads to biases and mistakes when making financial decisions. By being more aware of these biases, students will be better able to mitigate them as finance industry professionals, managers in non-financial firms, and investors of their own money. The course will also provide students with tools to understand how people process information and (under/over-) react to it during regular and crisis times, as well as the consequences for financial markets and individuals. For example, the course will provide students with the necessary tools to understand many important current relevant issues such ESG investing, investment and savings decisions during crisis and turbulent times, and many others. The course provides the tools to understand: i) why people care about ESG and green investment options, ii) possible ethical dilemmas and trade-offs people have to make when investing this way, iii) why that is relevant for society, iv) how people make mistakes when making ESG investment decisions, and v) how we can help them. Additionally, many of the concepts and theories we review in the course can be used to understand people's perception of societal challenges (e.g., green transition), how they might want to make a difference by investing in ways that reflect their values and how we can help people achieve their financial goals in a sound way conditional on their values. We will also study the "social dimension" of investing, for instance, how social media affects financial and economic choices (see for example, GameStop and meme-stock investing). |
||||||||||||||||||||||||||||||
Course prerequisites | ||||||||||||||||||||||||||||||
The course requires basic knowledge of economic theory and financial markets. | ||||||||||||||||||||||||||||||
Examination | ||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||
Course content, structure and pedagogical approach | ||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||
Description of the teaching methods | ||||||||||||||||||||||||||||||
Attendance lessons with online elements.
The teaching is mainly in English. The teaching should be inclusive for the participants, and participants are expected to participate actively in the lessons. |
||||||||||||||||||||||||||||||
Feedback during the teaching period | ||||||||||||||||||||||||||||||
We provide continuous feedback to students such
that they can understand the concepts covered in the course and
learn how to apply them both to real life situations/problems and
to exam type questions. This continuous feedback is a key
cornerstone of the learning process in the course.
For example, this feedback takes the form of exam type questions similar to previous semesters’ exam questions, as well as case studies designed by the instructor. These are normally based on real life problems and students try to solve the questions and discuss the cases in class. Afterwards, we discuss collectively potential solutions to the problems based on concepts discussed in the course. Feedback can also take the form of discussions of real life problems that students identify themselves in their working and daily life. Many students connect the concepts we cover in class with their own experiences. This creates student-motivated discussions in which students get yet another chance to receive feedback on their analysis of the real-life problems they have identified themselves. |
||||||||||||||||||||||||||||||
Student workload | ||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||
Further Information | ||||||||||||||||||||||||||||||
Teaching days and times
Changes may occur. |
||||||||||||||||||||||||||||||
Expected literature | ||||||||||||||||||||||||||||||
Course Book (CB):
Additional references:
Baker, Malcolm, and Jeffrey Wurgler, 2007, Investor Sentiment in the Stock Market, Journal of Economic Perspectives 21(2): 129–151
Barber, Brad, and Terrance Odean, 2001, The Internet and the Investor, Journal of Economic Perspectives, 15(1): 41-54
Benartzi, Shlomo and Richard H. Thaler, 2007, Heuristics and Biases in Retirement Savings Behavior, Journal of Economic Perspectives 21(3): 81–104
Burnside, Craig, Martin Eichenbaum, Isaac Kleshchelski, and Sergio Rebelo, 2011, Do Peso Problems Explain the Returns to the Carry Trade? Review of Financial Studies, 24(3): 853-891
Caginalp, Gunduz, David Porter, and Vernon Smith, 2001, Financial Bubbles: Excess Cash, Momentum, and Incomplete Information, Journal of Behavioral Finance, 2(2): 80-99
Doya, Kenji, 2008, Modulators of decision making, Nature Neuroscience 11(4): 410-416
Garber, Peter M., 1990, Famous First Bubbles, Journal of Economic Perspectives, 4(2): 35-54
Hong, Harrison, and Jeremy C. Stein, 2007, Disagreement and the Stock Market, Journal of Economic Perspectives 21(2): 109–128
Hvidkjaer, Soeren, 2008, Small Trades and the Cross-Section of Stock Returns, Review of Financial Studies 21(3): 1123–1151
Kahneman, Daniel, and Dan Lovallo, 1993, Timid Choices and Bold Forecasts: A Cognitive Perspective on Risk Taking, Management Science 39(1): 17-31
Loewenstein, George, and Richard Thaler, 1989, Anomalies: Intertemporal Choice, Journal of Economic Perspectives, 3(4): 181-193
Malmendier, Ulrike, and Geoffrey Tate, 2008, Who makes acquisitions? CEO overconfidence and the market's reaction, Journal of Financial Economics 89(1): 20-43
McClure, Samuel M., David I. Laibson, George Loewenstein, and Jonathan D. Cohen, 2004, Separate Neural Systems Value Immediate and Delayed Monetary Rewards, Science 306(5695): 503 – 507
Odean, Terrance, 1999, Do Investors Trade Too Much? American Economic Review, 89: 1279-1298
Platt, Michael L., and Scott A. Huettel, 2008, Risky business: the neuroeconomics of decision making under uncertainty, Nature Neuroscience, 11(4): 398-403
Reimers, Stian, Elizabeth A. Maylor, Neil Stewart, and Nick Chater, 2009, Associations between a one-shot delay discounting measure and age, income, education and real-world impulsive behavior, Personality and Individual Differences, 47(8): 973-978
Shiller, Robert J., 2003, From Efficient Markets Theory to Behavioral Finance, Journal of Economic Perspectives 17(1): 83-104
Siegel, Jeremy J., and Richard H. Thaler, 1997, Anomalies: The Equity Premium Puzzle, Journal of Economic Perspectives, 11(1): 191-200
Thaler, Richard H., 1999, Mental Accounting Matters, Journal of Behavioral Decision Making 12: 183-206
Thaler, Richard H., and Eric J. Johnson, 1999, Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice, Management Science 36(6): 643-660
Tversky, Amos, and Daniel Kahneman, 1974, Judgment under Uncertainty: Heuristics and Biases, Science 185(4157): 1124-1131
Recommended Books : These are books that are easy and fun to read. They provide a quick insight into how behavioral finance is being used in the real world. They are not part of the syllabus.
Akerlof, George A., and Robert J. Shiller, 2009, Animal Spirits: How Human Psychology Drives the Economy, and Why it Matters for Global Capitalism. Princeton University Press
Ariely, Dan, 2009, Predictably Irrational, The Hidden Forces That Shape Our Decisions, 2nd Ed. Harper
Kahneman, Daniel, 2011, Thinking, Fast and Slow. Farrar, Straus and Giroux
Lewis, Michael, 2010, The Big Short: A True Story. W.W. Norton.
Shrefrin, Hersh, 2000, Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing. Oxford University Press
Thaler, Richard H., and Cass R. Sunstein, 2009, Nudge: Improving Decisions About Health, Wealth, and Happiness. Yale University Press
|