SVKM’s Narsee Monjee Institute of Management Studies
Name of School – SBM, Bangalore
Program: MBA Trimester: V
Course/Module : Behavioral Finance Module Code:
Teaching Scheme Evaluation Scheme
Lecture Practical Term End
Tutorial Internal Continuous
(Hours (Hours Examinations (TEE)
(Hours per Credit Assessment (ICA)
per per (Marks- 40)
week) (Marks - 60)
week) week) in Question Paper)
3 3 Marks Scaled to Marks Scaled to
- -
-60- -40-
Pre-requisite: Corporate Finance
Objectives:
After completion of the course, students would be able to understand the behavioural dimensions of
finance decisions and understand investment, financing, dividend and working capital decisions of
corporates.
Outcomes: After completion of the course, students would be able to :
1. Understand the fundamental heuristics, psychological biases, and emotional and social
factors that affect financial decision making
2. Explain the concepts of prospect theory, framing and mental accounting
3. Apply the neuro scientific and evolutionary underpinnings of observed financial behavior.
4. Analyse market inefficiencies and outcomes that arise from behavioral factors.
5. Analyse why investors behave the way they do and how they can become more rational
6. Analyse financial decision making of corporates from the perspective of behavioural aspects.
Detailed Syllabus: ( per session plan )
Session Description Duration
in Hours
1 Rational Market Hypothesis and the challenge of Behaviouralists – 1.5
The Rise of the rational markets hypothesis-
Impact on Wall street and the corporates-
The Challenges of Behaviouralists –
Synthesis and Future Horizons
Exposure to the Evolution of theory of finance and intellectual contribution of
financial economists
2 Foundations of Rational Finance – 1.5
Expected Utility Theory-
Modern Portfolio Theory-
CAPM-Efficient Market Hypothesis
Understand and apply the concepts the rational finance Obtain a person’s utility
function
3 Heuristics and Biases 1.5
How the Human Mind works: the two systems –Familiarity and Related
Heuristics
To understand how mind works, Familiarity and related heuristics
SVKM’s Narsee Monjee Institute of Management Studies
Name of School – SBM, Bangalore
4 Anchoring- Irrationality and adaptation- hyperbolic discounting 1.5
To understand and comprehend what is Anchoring, irrationality
5 Self-Deception 1.5
Forms of overconfidence
Causes of overconfidence
other forms of self-deception
the success equation-
untangling skill and luck in business
To discuss Self-Deception and over confidence
6 Prospect Theory, Framing and Mental Accounting 1.5
To explain the Prospect theory
7 Error in Bernouli’s Theory 1.5
Prospect Theory
Framing
Mental Accounting
To understand Framing & mental accounting
8 Inefficient Market Hypothesis 1.5
Theoretical Foundations of the EMH-
Theoretical challenges & Assessments to the EMH
To be able to evaluate the EMH
9 Emotional Factors and Social Forces 1.5
Emotional and Social Forces
Substance of Emotion
Theories of Emotion
Emotional style
Emotions and investing
Fairness
Reciprocity and Trust
Conformity
Social Influence on Investment and Consumption
Evolutionary perspective on emotions, Theories of emotions, Emotional
Investing
10 Neuroscientific and Evolutionary Prospective 1.5
Brain Basics
Important Insights
Adaptive Market Hypothesis
Financial crisis and Limbic System
Understanding of Behavioral Portfolio Theory, Psychographic Models,
Overcoming Psychological Biases
11 Investor Behavior 1.5
What the Heuristics and biases mean for financial decision making-
Influence of emotions
Implications of mental accounting
Analyse the investor behavior and biases
12 Behavioural portfolio theory 1.5
SVKM’s Narsee Monjee Institute of Management Studies
Name of School – SBM, Bangalore
Psychographic models
Guidelines for overcoming psychological biases
Understand and comprehend the psychographic models
13 Market Outcomes 1.5
Size effect and seasonality-
Momentum and Reversals-
Post earnings announcement drift
Analyse the market outcomes
14 The Value premium 1.5
The equity premium puzzle
Excessive Volatility
Bubbles
Behavioural asset pricing model
Estimate the volatility
15 Value Investing 1.5
Central Tenets of Value Investing
Investment
Analyse and critically examine the Value investing concepts
16 Evidence and prospects of value investing strategies of some well- known value 1.5
investors
Estimate the returns and critic the value investment strategies
17-18 Behavioural Corporate Finance 3
Rational managers with irrational Investors approach-
Valuation
Capital budgeting
Capital structure
Dividend policy
Agency conflicts and corporate governance
Critically examine the behavioural aspects of corporate decision making
19 Building a smart organization 1.5
Challenges in building a psychologically smart organization
Accounting
Financial planning
Incentives
Information sharing
Group processes
Improving organizational decision making process
Understand what the smart organization is and process required to build one
20 Wisdom from other sources 1.5
Wisdom of crowds
Fooled by randomness
Power laws
Noise and performance in stock market
Evolutionary analogy
SVKM’s Narsee Monjee Institute of Management Studies
Name of School – SBM, Bangalore
Animal spirits
Halo effect and company performance
Flaws of finance-
The clash of cultures
The Zurich axioms
The Swiss wisdom
To discuss the wisdom from crowds
Total 30
Text Books:
Behavioral Finance, 1e, Prasanna Chandra, McGraw Hill, 2016
Reference Books:
Behavioural Finance, William Forbes, Wiley Student, 2009.
Personal Finance and Investments- A Behavioural Finance Perspective by Keith Redhead- from
Routledge Publication.
Behavioural Finance- Insights into Irrational Minds and Markets – James Montier – John Wiley &
Sons, Ltd.
Financial Risk Taking – Introduction to Psychology of Trading and Behavioural Finance- Mike Elvin
– John Wiley & sons, Ltd.
Behavioural Finance: Investors, Corporations and Markets, Baker & Nofsinger, Wiley, 2012.
Thinking Fast and Slow, Daniel Kahneman, Penguin, 2015.
Nudge: Improving Decisions About Health, Wealth and Happiness, Richard Thaler, Penguin, 2009
Any other information :
Total Marks of Internal Continuous Assessment (ICA) : 60 Marks
Distribution of ICA Marks :
Description of ICA Marks
Class Quizzes (2) 20
Course Project & Viva 20
Mid-Term 20
Term-End Exam 40
Total Marks : 100
_________ ____________
Signature Signature
(Prepared by Concerned Faculty/HOD) (Approved by Dean)
