Undergraduate Course: Psychology of Finance (BUST10137)
Course Outline
| School | Business School |
College | College of Humanities and Social Science |
| Credit level (Normal year taken) | SCQF Level 10 (Year 3 Undergraduate) |
Availability | Available to all students |
| SCQF Credits | 10 |
ECTS Credits | 5 |
| Summary | This course is a two-week Summer School course with 20 hours of class sessions. It is designed to provide an overview of an exciting and emerging area in finance which argues that investment decision-making and investor behaviour are not necessarily driven by rational agents and considerations but by aspects of personal and market psychology. Behavioural finance posits that biases and errors of judgment, to which all of us are prone, limit our ability to make sound financial decisions.
This course introduces cognitive biases and heuristics, discusses the impact of such biases on the financial decision-making, and explores the behaviour of individual investors, professional investors and corporate managers. |
| Course description |
The course is intended to complement other finance courses that are mainly based on the traditional paradigm assuming investors and managers are generally rational. It aims to examine how the insights of behavioural finance theories shed light on the behaviour of individual investors as well as finance professionals in investment decision-making and corporate financial decision-making. It also explores the possibility to improve investment and corporate performance by recognising the cognitive biases and applying appropriate debiasing techniques.
Planned list of topics include:
1. Introduction to psychology of finance
2. Fundamental theories of investment psychology
3. Investment biases and heuristics (part 1)
4. Investment biases and heuristics (part 2)
5. Behavioural portfolio management
6. Emotions in finance
7. Social interactions in finance
8. Neuro-finance
9. Asset price bubbles
10. Behavioural corporate finance
Student Learning Experience
We will use a variety of delivery methods in the course including lectures, interactive learning exercises, psychometric tests, short videos, case studies and will also make use of student response devices (clickers) for immediate feedback.
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Entry Requirements (not applicable to Visiting Students)
| Pre-requisites |
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Co-requisites | |
| Prohibited Combinations | |
Other requirements | None |
Information for Visiting Students
| Pre-requisites | This course is available to visiting students with some demonstrable background in finance. Visiting students will normally have completed at least 3 courses in this subject at their home university. |
| High Demand Course? |
Yes |
Course Delivery Information
| Not being delivered |
Learning Outcomes
On completion of this course, the student will be able to:
- Understand the differences between a behavioural finance perspective and a traditional finance perspective;
- Critically define, identify and conceptualise the cognitive biases and errors of judgment that affect financial decisions;
- Apply their acquired knowledge of behavioural influences to various personal investment decision scenarios;
- Apply their acquired knowledge of behavioural influences to various corporate financial decision scenarios;
- Offer practical insights on the important developments in the new area of behavioural finance
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Learning Resources
| Nofsinger, John (2014) The Psychology of Investing, 5th edition, Prentice Hall ISBN: 0133382877. |
Additional Information
| Graduate Attributes and Skills |
Research & Enquiry:
Provide clear, well-organised arguments concerning the body of knowledge on the psychology of finance, in the form of both oral and written presentations.
Be able to critically review and appraise the literature in the area of behavioural finance.
Personal & Intellectual Autonomy:
The ability to work independently, especially through individual study.
Communication skills
Communicate effectively with other people, using verbal and written means
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| Special Arrangements |
University of Edinburgh students will not receive credit for this course.
The course class sessions (20 hours) are as follows:
15-18 June 2015 - 3 hours each day
22-23 June - 3 hours each day
24 June - 2 hours
No work is required prior to or following the summer school. Of course, once the reading list is advertised, students can prepare in advance by reading the papers etc. but this will not be a formal component.
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| Keywords | Not entered |
Contacts
| Course organiser | Dr Arman Eshraghi
Tel: (0131 6)50 4311
Email: |
Course secretary | Miss Rachel Martin
Tel: (0131 6)51 5086
Email: |
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