Behavioural Finance

Syllabus

SE FIN - 09: Behavioral Finance

UNIT-1

Introduction to Behavioral Finance: Traditional / Conventional / Standard View of Financial Markets - Basic Concepts, Assumptions & Limitations; Financial Market Inefficiencies - Anomalies & Crisis; Evolution, Objectives & Scope of Behavioral Finance; Difference between Standard Finance & Behavioral Finance.              (7+2) 

UNIT-2

Sources of Irrationality: External Factors Defining Investors Behaviour - Demographic, Social, Economic, Phases & Effect of Geomagnetic Storm on Financial Market; Types of Investors; Investment Cycle - Boom & Bust Cycles, Fear & Greed in Financial Market and Systematic Investors Sentiments, Portrait of an Individual Investor & Institutional Investors, Implications of Biases, Influence of Emotions.         (7+2) 

UNIT-3

Theories of Behavioral Finance: Bounded Rationality & Cognitive Dissonance; Self-perception; Prospect Theory & Loss Aversion; Risk Aversion; Limit to Arbitrage & Cost involved in Arbitrage Process; Model of Limited Attention, Framing, Mental Accounting.  (7+2) 

UNIT-4

Biases Theories: Heuristics & its Types; Sources & Classification of Biases - Heuristic Drive & Frame Driven, Cognitive & Emotional Biases; Impact of Different Biases on Investors; Nudge Theory; Characteristics of Extremely Successful Investors.                                                                 (7+2)

UNIT-5

Corporate Behavioral Finance: Introduction, Corporate Financial Decision Making: Heuristics & Biases Affecting Behaviour During Investment, Financing & Dividend Decisions; Presence and Absence of Dividend, Ex-Dividend Day Behaviour, Timing of Corporate News/ Announcement, Insider Trading, Corporate Scandals.           (7+2)