Behavioural Finance | MBA 4th Sem | JNTUK

Syllabus

EF-405: BEHAVIOURAL FINANCE

Unit – I

Introduction to Behavioral Finance – Nature, Scope, Objectives and Application; Investment Decision Cycle: Judgment Under Uncertainty :Cognitive Information Perception - Peculiarities (Biases) of Quantitative and Numerical Information Perception - Weber Law, Subjective Probability – Representativeness – Anchoring - Asymmetric Perception of Gains and Losses Framing and Other Behavioral Effects - Exponential Discounting - Human Economic Behavior - Discount Factors for Short and Long Horizons - Experimental Measurement of the Discount Factor - Hyperbolic Discounting. 

Unit – II

Utility/ Preference Functions: Expected Utility Theory [EUT] and Rational Thought: Decision Making Under Risk and Uncertainty - Expected Utility as a Basis for Decision-Making – Theories Based on Expected Utility Concept – Decision Making in Historical Prospective - Allais and Elsberg’s Paradoxes - Rationality from an Economics and Evolutionary Prospective – Herbert Simon and Bounded Rationality- Investor Rationality and Market Efficiency - Empirical Data that Questions Market Efficiency. 

Unit –III

Behavioral Factors and Financial Markets: The Efficient Markets Hypothesis – Fundamental Information and Financial Markets - Information Available for Market Participants and Market Efficiency -Market Predictability –The Concept of Limits of Arbitrage Model - Asset Management and Behavioral Factors - Active Portfolio Management: Return Statistics and Sources of Systematic Underperformance. - Fundamental Information and Technical Analysis – the Case for Psychological Influence. 

Unit – IV

Behavioral Corporate Finance: Behavioral Factors and Corporate Decisions on Capital Structure and Dividend Policy - Capital Structure Dependence on Market Timing - Mergers and Acquisitions. Systematic Approach to Using Behavioral Factors in Corporate Decision Making. External Factors and Investor Behavior: Mechanisms of the External Factor Influence on Risk Perception and Attitudes - Connection to Human Psychophysiology and Emotional Regulation Active Portfolio Management – the Source of the Systematic Underperformance. 

Unit – V

Emotions and Decision – Making: Experimental Measurement of Risk-Related - Measuring Risk - Emotional Mechanisms in Modulating Risk-Taking Attitude - Neurophysiology of Risk Taking. Personality Traits and Risk Attitudes in Different Domains.