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Behavioural Finance LUBS3140

Behavioural Finance LUBS3140. Key facts. Module leader: Professor Kevin Keasey Semester: 2 Credits: 10 Professional exemptions: N/A Pre-requisites: LUB2200 Business Finance 2. Focus of the module. Aims to provide an alternative view to the rational perspective of modern finance theory

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Behavioural Finance LUBS3140

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  1. Behavioural FinanceLUBS3140

  2. Key facts • Module leader: Professor Kevin Keasey • Semester: 2 • Credits: 10 • Professional exemptions: N/A • Pre-requisites: • LUB2200 Business Finance 2

  3. Focus of the module • Aims to provide an alternative view to the rational perspective of modern finance theory • Draws on insights from psychology to explore psychological biases in financial decision making • Examines the impact of psychological biases on investor behaviour and asset pricing • No prior psychology knowledge is required

  4. Focus of the module Foundations and theoretical developments: Foundations of modern finance theory and efficient markets Limits to arbitrage Investor psychology: heuristics and biases Prospect theory, loss aversion and mental accounting Applications (indicative topics include …): Equity premium puzzle Momentum and herding Disposition effect and house money effect: prior outcomes Investor sentiment and emotions in financial decisions

  5. Assessment • End of Semester 2 • Two hour, unseen examination • Questions will be a combination of … • MCQs – answer all – test breadth of knowledge • Essay – choice – test depth of knowledge • Formative feedback • Online MCQ • Individual comments on extended essay plan

  6. Core text / key reading • Recommended textbook • Lucy Ackert and Richard Deaves, Behavioral Finance: Psychology, Decision-Making, and Markets, 2009, South-Western Cengage Learning • Preparatory reading over the summer ... • Max Bazerman and Don Moore, Judgment in Managerial Decision Making, 2008, Wiley • Good introduction to heuristics and biases in decision making generally

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