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Unit of study_
FINC3023: Behavioural Finance
2024 unit information
Behavioural Finance explores financial market 'anomalies' - factors that are not traditionally explained by efficient markets theory - such as why stock prices exhibit momentum and reversals, why large swings in stock prices occur over short time periods, and how individual investors differ from institutional investors.
Unit details and rules
Managing faculty or University school:
Business (Business School)
| Study level | Undergraduate |
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| Academic unit | Finance |
| Credit points | 6 |
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Prerequisites:
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FINC2012 |
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Corequisites:
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None |
| Prohibitions:
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None |
| Assumed knowledge:
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None |
At the completion of this unit, you should be able to:
- LO1. Apply the basic framework of expected utility as the classical normative approach to model financial decision-making.
- LO2. Consider the role of bounded rationality, limited attention and other phenomena that restricts, hinder or limit the ability of individuals to make efficient financial decisions, and how they adopt different heuristics and behaviours to make actual decisions or follow professional financial advice.
- LO3. Identify and mitigate how errors in probability judgements can lead to suboptimal investment decisions and bad investment outcomes.
- LO4. Explain how the limits of human cognition and the limits of arbitrage can combine together to produce excessive financial market volume and volatility along with bubbles and crashes (including media coverage, sentiment and other factors), and their effect on individual security prices.
- LO5. Assess how rules-of-thumb or perceived wisdom of simple financial advice for lay persons might interact, reinforce or stave off effects that arise from individual biased beliefs or inconsistent preferences.
- LO6. Integrate the role of social interactions and social preferences with financial decision-making in different domains.
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