Behavioural Finance

mlsmm2124  2022-2023  Mons

Behavioural Finance
5.00 credits
30.0 h
Main themes
  • Economic Foundations of Neoclassical Finance
  • Foundations of Behavioural Science
  • Investor behaviour and bias in financial decisions
Learning outcomes

At the end of this learning unit, the student is able to :

  • Understand complexity in decision-making, the distinction between the reality of a situation and perception
  • Understand both the rational aspects of decision-making according to the classical finance approach and behavioral biases
  • Explain certain behavioral biases in investment decisions
Chapter 1: Course content and goals
  • What is behavioral finance? BF versus Traditional Finance (TF)?
  • How do we make decisions? Are they rational? Rational preferences?
Chapter 2: Foundations of finance and limitations
  • Uncertainty, Risk, Expected Utility Theory and Risk attitude
  • Diversification, CAPM and Market Efficiency
  • Allais’ Paradox and Prospect Theory
Chapter 3: Judgement and decisions biases
  • Biases and heuristics
  • Biases in Decision-Making
Chapter 4: Well-known Biases and Mistakes in Finance
  • Disposition effect, Attention Bias and Excessive Trading
  • Diversification and Home Bias 
  • Market Sentiment and Limits to Arbitrage
Chapter 5 : Research methods
  • Experiments: What? Why? How?
  • Classification and design + Analysis of experimental data
Teaching methods
  • Usual and flipped classrooms (based on videos to be seen before coming in the classroom)
  • Simple computerized experiments will be organized in order to illustrate several concepts
Evaluation methods
  • Written exam (June) / Oral exam (August)
  • A part of the final grade may be based on individual / group assignments
Other information
If possible, students are requested to bring a device allowing an internet connection (tablet, smartphone or laptop). You will need this device to access the 'app' specifically developped to boost interaction in this course and to replicate several scientific experiments.
  • Daniel Kahneman, Thinking, Fast and Slow, Penguin Books, 2011.
  • Daniel Kahneman, Paul Slovic & Amos Tversky, Judgement under Uncertainty: Heuristics and Biases, Cambridge University Press, 1982
  • Richard Thaler & Cass Sunstein, Nudge: Improving Decisions About Health, Wealth, and Happiness, Penguin Books, 2009
  • Itzhak Venezia, Lecture Notes in Behavioral Finance, World Scientific Publishing, 2018
Faculty or entity

Programmes / formations proposant cette unité d'enseignement (UE)

Title of the programme
Learning outcomes
Master [120] in Management

Master [120] in Business Management

Master [120] : Business Engineering

Master [120] in Management

Master [120] : Business Engineering