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JOHN CABOT UNIVERSITY
COURSE CODE: "FIN 370"
COURSE NAME: "Behavioral Finance"
SEMESTER & YEAR:
Fall 2019
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SYLLABUS
INSTRUCTOR:
Paola Paiardini
EMAIL: [email protected]
HOURS:
MW 10:00 11:15 AM
TOTAL NO. OF CONTACT HOURS:
45
CREDITS:
3
PREREQUISITES:
Prerequisite: FIN 301
OFFICE HOURS:
by appointment
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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.
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SUMMARY OF COURSE CONTENT:
Traditional economics and finance is developed on the assumption of a rational utility maximizing economic agent. Recent empirical evidence, however, suggests that real people behave differently than assumed. This module reviews the literature on cognitive psychology as regards to human and investor behavior and contrasts this with the behavior that is expected from traditional models. We discuss Prospect Theory (PT), i.e. a theory alternative to Expected Utility Theory (EUT), and show that many empirical phenomena that are considered as ‘anomalies’ by traditional finance can be explained within this framework. The module also discusses empirical findings on various related issues such as herding behavior, measures of herding, investor overreaction and under-reaction, measurement of investor sentiment, among others. Moreover, we will also focus on some experimental evidence in the experimental finance literature.
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Teaching
Weeks
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Topics
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Required Readings
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Week 1
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Introduction
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Relevant chapters in books and articles.
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Week 2
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Expected utility and some paradox
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Relevant chapters in books and articles.
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Week 3-4
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Market Efficiency
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Relevant chapters in books and articles.
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Week 5-6
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Prospect Theory
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Relevant chapters in books and articles.
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Week 7-8
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Herding Behavior in Financial Markets
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Relevant chapters in books and articles.
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Week 9-10
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Investor Sentiment: Measurement & Empirical Evidence
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Relevant chapters in books and articles
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Week 11-13
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Presentations
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Week 14
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Revision for final exam
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LEARNING OUTCOMES:
Upon successful completion of this course, students will:
- Gain an understanding of the most important issues in Behavioral Finance.
- Learn how to examine phenomena that affect investment decisions / behavior.
- Learn how to critically asses and discuss behavioral explanations of observed capital market inefficiencies.
- Learn how to identify empirical evidence of market anomalies and understand the drivers of these anomalies.
- Learn methods to improve financial decision making.
- Lear how experimental techniques could be useful for analyzing some financial markets anomalies.
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TEXTBOOK:
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REQUIRED RESERVED READING:
RECOMMENDED RESERVED READING:
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GRADING POLICY
-ASSESSMENT METHODS:
| Assignment | Guidelines | Weight |
| Midterm Exam | | 20% |
| Group presentation | Students will read and present in class the main findings of a paper. | 30% |
| Final Exam | | 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 ____________
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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.
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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.
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SCHEDULE
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A detailed schedule will be provided at the beginning of the course.
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