This module is not currently running in 2024 to 2025.
The module introduces behavioural finance as an approach to explain the decisions and behaviour that take place within financial markets through psychological theory and evidence. The module will discuss the theoretical and empirical limitations of traditional finance theory and introduce the foundations of behavioural finance. The module will examine behavioural explanations for anomalies that exist in the financial markets and students will gain an understanding of the inherent implications, in addition to limitations of behavioural finance. The module will examine the theory and evidence on Efficient Market Hypothesis, evidence of inefficiency, and will cover psychological research.
Topics will include:
• The efficient Market Hypothesis: Theory and evidence
• Issues surrounding finance theories
• Behavioural explanations for anomalies
• Bubbles, herding, momentum
• Investor sentiment: Over and under reaction
• Limits to arbitrage, evidence of inefficiency
• Prospect theory
The module will be taught by lectures, seminars and private study.
Total Contact Hours: 33
Private Study Hours: 117
Main assessment methods
Individual Essay- 2000 words: 30%
Examination – two-hour, closed book, unseen: 70%
Reassessment methods
Reassessment will be on a like-for-like basis.
• Ackert, L.F. and Deaves, R. (2009). Behavioural Finance: Psychology, Decision-Making and Markets. Independence, KY: South-Western Cengage Learning. ISBN-10: 0324661177. ISBN-13: 9780324661170
• Forber W. 2009. Behavioural Finance. Chichester: John Wiley & Sons. ISBN 9780470028049
• Shleifer, A. (2000). Inefficient Markets: An introduction to Behavioural Finance. Oxford: Oxford University Press. ISBN: 9780198292272
The intended subject specific learning outcomes.
On successfully completing the module students will be able to:
- Demonstrate an understanding of the key theoretical and empirical literature in behavioural finance.
- Critically evaluate behavioural explanations for anomalies that exist in the financial markets.
- Critically analyse, compare and discuss financial theories.
- Provide an alternative perspective to traditional finance theory.
- Demonstrate an understanding of implications and limitations of behavioural finance.
The intended generic learning outcomes.
On successfully completing the module students will be able to:
- Critically evaluate arguments and assumptions, and make judgements to offer alternative solutions.
- Develop, analyse and synthesise complex material relevant to financial issues.
- Plan work, use relevant sources and study independently.
- Effectively communicate information, ideas, and solutions to both specialist and non-specialist audiences.
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