2019/20 Undergraduate Module Catalogue

LUBS3140 Behavioural Finance

10 creditsClass Size: 60

Module manager: Shima Amini
Email: S.Amini@lubs.leeds.ac.uk

Taught: Semester 2 (Jan to Jun) View Timetable

Year running 2019/20

Pre-requisite qualifications

LUBS2205 Corporate Finance
OR
LUBS2206 Corporate Financial Management

This module is mutually exclusive with

LUBS2035

Finance for Small Business

This module is not approved as a discovery module

Objectives

On completion of this module, students should be able to:
(1) Critique the rational perspective of modern finance theory.
(2) Identify the heuristics and biases that affect financial decisions.
(3) Explain how heuristics and biases influence investor behaviour and the functioning of the financial markets.

Learning outcomes
This module aims to provide students with an alternative view to the rational perspective of modern finance theory. Drawing on insights from psychology the module explores the psychological biases in financial decision making, and examines the impact of these biases on investor behaviour and asset pricing.

Skills outcomes
- Ability to critique rational perspective of modern finance theory.
- Ability to understand how heuristics and biases impact investor behaviour and financial markets.
- Ability to apply behavioural concepts to understand specific applications in financial markets.

Syllabus

Foundations and theoretical developments:
- Foundations of modern finance theory and efficient markets
- Limits to arbitrage
- Risk perception and investors preferences, axioms of rational choice and Expected Utility Theory
- Prospect theory, loss aversion and mental accounting
- Investor psychology: heuristics and biases
- Implications of heuristics and biases for financial decision making

Applications (selection of applications to be covered):
- Equity premium puzzle
- Excess volatility
- Momentum and herding
- Investor overconfidence
- Disposition effect and house money effect: prior outcomes
- Mental accounting
- Behavioural finance and retirement

Teaching methods

Delivery type	Number	Length hours	Student hours
Lecture	11	1.50	16.50
Seminar	5	1.00	5.00
Private study hours			78.50
Total Contact hours			21.50
Total hours (100hr per 10 credits)			100.00

Private study

Follow on reading from lectures and preparation for classes. Students will be expected to contribute to discussion in the classes. Completion of on-line MCQ tests.

Opportunities for Formative Feedback

The methods of formative feedback used on the module include:
- Class discussion of required reading;
- On-line MCQ tests.

Methods of assessment

Exams

Exam type	Exam duration	% of formal assessment
Standard exam (closed essays, MCQs etc)	2 hr 00 mins	100.00
Total percentage (Assessment Exams)		100.00

The resit for this module will be 100% by 2 hour examination.

Reading list

The reading list is available from the Library website

Last updated: 10/07/2019

Disclaimer

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