Subject:Behavioral Finance
Program:MBA Semester :III
Subject Code:MB0323
Teaching Scheme Examination Evaluation Scheme
Lecture Tutorial Practical Credits University University Continuous Continuous Total
Theory Practical Internal Internal
Examination Examinatio Evaluation Evaluation
n (CIE)- (CIE)-
Theory Practical
3 0 0 3 24/60 - 16/40 - 100
Course Objectives:
To Develop an Understanding of finance and enable the students to
evaluate the firm’s decision areas related to finance.To help students
appreciate the limitations of ‘rational’ models of investment decision
making and introduce students to an alternate framework for
understanding price discovery in the markets.To help students identify
persistent or systematic behavioral factors that influence investment
behavior
Course CIontent:
UNIT-I Introduction to Behavioral Finance: Concept, Nature, Scope, Objectives,
Difference between Standard Finance and Behavioral Finance, Traditional View of
Financial Markets, Anomalies of Financial Markets, Limitation of Efficient
Market Hypothesis, Behavioral Financial Market Strategies, Behavioral Indicators,
Psychology: Social, Behavioral, Physiological , Applied , Educational , Cognitive
Psychology, Boom & Bust Cycles, Prospect Theory, Loss aversion theory,
Unit 2 - Behavioral Biases theories : Heuristics, Overconfidence Bias,
Representativeness, Anchoring and Adjustment bias, cognitive dissonance bias
availability bias, self attribution bias, illusion of control bias conservation bias,
endowment bias,optimism bias, confirmation bias, Impact of bias on investors,
External factors defining investors behavior, Fear and Greed in Financial Market,
Finance &Emotions, Investors & types, Characteristics of extremely successful
investor,Bubbles and systematic investors sentiments
Unit 3 - Risk Aversion and expected marginal utility, Risk aversion- Rabin and
Thaler,Expected utility theories, Rationality in investment decisions: Concept,
Limitation,assumptions for rational decision making model, Rational decision making
process, Dependency of Rationality on Time Horizon, Herbert Simon and Bounded
Rationality,
Unit 4 - Group Behavior: Conformism, herding, fatal attractions.
Emotion and Neuroscience,Geomagnetic storm: phase, types, causes, effect,
Geomagnetic storm and financial market, Impact of geomagnetic storm on stock
market return.Factors influencing stock & stock market, External factors and
investors behavior,Classification of external factors influencing investors behavior,
factors
influencing on investors behavior,
Unit 5 - ∙Dynamic Asset Allocation: CRRA Investors, Behavioral Clients,
Mean Reversion Structured Wealth Management Process: Risk Ability,
Risk Awareness, Risk Tolernance, Investment Style
Course Outcome:
Enumerate the key terms associate with behavior finance, investment in financial
markets & Corporate finance.
Illustrate the various theories associated with behavior finance and parameters
of investing in financial market.
Identify persistent or systematic behavioural factors that influence investors and
investment decisions.
.Analyzing Analyse the various behavioural finance factors related to corporate &
individual investors.
Evaluating Interpret various investment strategies of effective investment in the
financial market on the basis of various theories and factors of behavioural
finance.
Creating Plan the systematic approach of corporate and investors toward.
Suggested Textbooks:
1. Behavioral Finance: Psychology, Decision-Making, and Markets", by Ackert and
Deaves.
2. Understanding Behavioral Finance by Ackert
3. The Psychology of Investing by John R. Nofsinger, Pearson Prentice Hall, (4th
Edition)
4. What Investors Really Want - Learn the lessons of behavioral Finance, Meir
Statman, McGraw-Hill
5. Behavioral Finance by Shuchita singh, Shilpa Bahl
Suggested Reference Book:
1. Handbook of Behavioral Finance – Brian R. Bruce
2. Behavioral finance - Wiley Finance - Joachim Goldberg, Rüdiger von Nitzsch
3. Behavioral finance – Peter Dybdahl Hede
4. Behavioral Finance – Ackert, L.F. & Deaves,R
