Course Syllabus

JOHN CABOT UNIVERSITY

COURSE CODE: "FIN 370"
COURSE NAME: "Behavioral Finance"
SEMESTER & YEAR: Spring 2017

SYLLABUS

INSTRUCTOR: Enrico Cervellati
EMAIL: [email protected]
HOURS: M 3:00PM 5:45PM
TOTAL NO. OF CONTACT HOURS: 45
CREDITS: 3
PREREQUISITES: Prerequisite: FIN 301
OFFICE HOURS:

COURSE DESCRIPTION:
Behavioral Finance studies how individuals and firms make financial decisions, and how those decisions might deviate from those predicted by traditional finance or economic theory. Behavioral finance focuses on persistent decision-making biases that have been documented by psychologists. In fact, according to behavioral finance, many facts about asset prices, investor behavior, and managerial behavior are best understood in models where at least some agents are not fully rational. Therefore, this course introduces the theories developed by research into cognitive biases, individual emotions and other psychological effects of decision making, and explores the applications of these theories in finance, investment, and management. It also introduces students to behavioral and experimental methodologies used in finance, economics and other disciplines.

SUMMARY OF COURSE CONTENT:

The course is divided in two parts, corresponding to the same parts in the textbook (see below).

Part 1: Behavioral People are Normal People

•Standard Finance (homo oeconomicus) “vs.” Behavioral Finance (Normal people)

•Utilitarian, expressive, and emotional benefits

•Cognitive shortcuts and errors 

•Emotional shortcuts and errors

•Correcting cognitive and emotional errors

•Expected Utility Theory and Prospect Theory 

•Behavioral Finance Puzzles: The dividend puzzle, the disposition puzzle, and the puzzles of dollar-cost-averaging and time-diversification

Part 2: Behavioral Finance in Portfolios, Life-Cycles, Asset Prices, and Market Efficiency

•Behavioral portfolios

•Behavioral life-cycle of saving and spending

•Behavioral asset pricing

•Behavioral efficient markets

•Lessons of behavioral finance

LEARNING OUTCOMES:

Upon successful completion of this course, students will gain an understanding of how individuals make financial decisions and obtain guidance on how to improve decision making. Students will learn the major implications of human psychology for financial decision makers and for financial markets.

TEXTBOOK:

Book Title	Author	Publisher	ISBN number	Library Call Number	Comments	Format	Local Bookstore	Online Purchase
Finance for Normal People: How Investors and Markets Behave	.	Oxford University Press, Student Manual	.		Since the book is forthcoming (will be published in May-June 2017), we will use the Student Manual and other material from the book that the professor will provide to the students, including parts of the book chapters and or articles related to the contents of the book. Students are not allowed to copy, scan or distribute the student manual, the chapters of the book or any other material from the book, that is covered by copyright.

REQUIRED RESERVED READING:

NONE

RECOMMENDED RESERVED READING:

NONE

GRADING POLICY
-ASSESSMENT METHODS:

Assignment	Guidelines	Weight
Team Project	Specific guidelines will be provided in class, as well as groups sizes.	15%
Midterm exam	Written exam that will be based on the material of Part 1 of the course, i.e., classes 1-6 (Chapters 1-6 of Student Manual).	35%
Final exam (comprehensive)	Written exam that will be mainly based on the material of Part 2 of the course, but also on the material of Part 1 that is linked to Part 2.	50%

-ASSESSMENT CRITERIA:
AWork of this quality directly addresses the question or problem raised and provides a coherent argument displaying an extensive knowledge of relevant information or content. This type of work demonstrates the ability to critically evaluate concepts and theory and has an element of novelty and originality. There is clear evidence of a significant amount of reading beyond that required for the course.
BThis is highly competent level of performance and directly addresses the question or problem raised.There is a demonstration of some ability to critically evaluatetheory and concepts and relate them to practice. Discussions reflect the student’s own arguments and are not simply a repetition of standard lecture andreference material. The work does not suffer from any major errors or omissions and provides evidence of reading beyond the required assignments.
CThis is an acceptable level of performance and provides answers that are clear but limited, reflecting the information offered in the lectures and reference readings.
DThis level of performances demonstrates that the student lacks a coherent grasp of the material.Important information is omitted and irrelevant points included.In effect, the student has barely done enough to persuade the instructor that s/he should not fail.
FThis work fails to show any knowledge or understanding of the issues raised in the question. Most of the material in the answer is irrelevant.

-ATTENDANCE REQUIREMENTS:
ATTENDANCE REQUIREMENTS AND EXAMINATION POLICY

You cannot make-up a major exam (midterm or final) without the permission of the Dean’s Office. The Dean’s Office will grant such permission only when the absence was caused by a serious impediment, such as a documented illness, hospitalization or death in the immediate family (in which you must attend the funeral) or other situations of similar gravity. Absences due to other meaningful conflicts, such as job interviews, family celebrations, travel difficulties, student misunderstandings or personal convenience, will not be excused. Students who will be absent from a major exam must notify the Dean’s Office prior to that exam. Absences from class due to the observance of a religious holiday will normally be excused. Individual students who will have to miss class to observe a religious holiday should notify the instructor by the end of the Add/Drop period to make prior arrangements for making up any work that will be missed. The final exam period runs until ____________

ACADEMIC HONESTY
As stated in the university catalog, any student who commits an act of academic dishonesty will receive a failing grade on the work in which the dishonesty occurred. In addition, acts of academic dishonesty, irrespective of the weight of the assignment, may result in the student receiving a failing grade in the course. Instances of academic dishonesty will be reported to the Dean of Academic Affairs. A student who is reported twice for academic dishonesty is subject to summary dismissal from the University. In such a case, the Academic Council will then make a recommendation to the President, who will make the final decision.

STUDENTS WITH LEARNING OR OTHER DISABILITIES
John Cabot University does not discriminate on the basis of disability or handicap. Students with approved accommodations must inform their professors at the beginning of the term. Please see the website for the complete policy.

SCHEDULE

Session/ Weeks	Session Focus	Reading Assignment: Student Manual (SM) Chapters and Articles (TBA)	Other Assignment (TBA)	Exam Dates and submission deadlines (TBA)
1	Standard “vs.” Behavioral Finance	Ch. 1 SM
2	Utilitarian, expressive, and emotional benefits	Ch. 2 SM
3	Cognitive shortcuts and errors	Ch. 3 SM
4	Emotional shortcuts and errors	Ch. 4 SM
5	Correcting cognitive and emotional errors	Ch. 5 SM
6	Expected Utility Theory and Prospect Theory	Ch. 6 SM
7	Midterm Exam
8	Behavioral Finance Puzzles: The dividend puzzle, the disposition puzzle, and the puzzles of dollar-cost-averaging and time-diversification	Ch. 7 SM
9	Behavioral portfolios	Ch. 8 SM
10	Behavioral life-cycle of saving and spending	Ch. 9 SM
11	Behavioral asset pricing	Ch. 10 SM
12	Behavioral efficient markets	Ch. 11 SM
13	Lessons of behavioral finance	Ch. 12 SM
14	Final review of the course