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MN30509: Behavioural finance

Follow this link for further information on academic years Academic Year: 2013/4
Further information on owning departmentsOwning Department/School: School of Management
Further information on credits Credits: 6
Further information on unit levels Level: Honours (FHEQ level 6)
Further information on teaching periods Period: Semester 2
Further information on unit assessment Assessment: CW 40%, EX 60%
Further information on supplementary assessment Supplementary Assessment: Like-for-like reassessment (where allowed by programme regulations)
Further information on requisites Requisites: You must take MN20211 either before or whilst taking this unit.
Further information on descriptions Description: Aims:
This unit aims to provide the students with a theoretical and practical understanding of the effects of investor and managerial psychological biases on financial markets and corporate finance decisions.

Learning Outcomes:
Behavioural finance develops current economic analysis of financial markets and corporate finance by considering the impact of human psychology and irrationality (both at the investor and the corporate manager level). At the end of the unit students will be expected to be able to:
* Understand, and discuss, the development from the standard economic theories of financial markets and corporate finance to those embodied in behavioural finance and behavioural corporate finance
* Analyse the psychological biases that can affect investors and corporate managers
* Analyse the differences in the inefficiencies in financial markets and corporate finance that result from psychological biases, compared with those arising from the agency theories of standard corporate finance
* Analyse the effects of investor biases on financial markets and corporate finance decision making
* Analyse the effects of managerial biases on corporate finance decisions, such as investment appraisal, capital structure, dividend policy, mergers and acquisitions
* Examine theoretical and empirical models relating to managerial and investor psychological biases.

Numeracy (T/A)
Analytical ability (F/A)
Writing skills (A)
Time management (F/A) Content:The course will be based around the following textbooks:
* "Behavioral Finance: Psychology, Decision-Making, and Markets," by Lucy Ackert and Richard Deaves.
* "Behavioral Corporate Finance: Decisions that Create Value," by Hersh Shefrin..
The content of the course is as follows:
Behavioural Finance (based on Ackert and Deaves)
* Foundations of Finance: EUT, Asset Pricing, Market Efficiency, Agency Relationships.
* Introduction to human psychological biases
* Prospect Theory, Framing, Mental Accounting
* Challenges to Market Efficiency
* Heuristics and Biases and the Implications for Financial Decision Making
* Investor Overconfidence and the Implications for Financial Decision Making
* Individual Investors and the Force of Emotion
* Social Forces and the implications for financial markets
* Behavioural explanations for financial market anomalies
Behavioural Corporate Finance (Ackert and Deaves Chapters 15, 16, 17, 18 and Shefrin's book)
* Managerial Biases
* The effect of managerial and investor biases on investment appraisal decisions
* The effect of managerial and investor biases on Capital Structure decisions
* The effect of managerial and investor biases on dividend decisions
* The effect of managerial and investor biases on merger decisions
The unit will also refer to relevant journal articles.
Further information on programme availabilityProgramme availability:

MN30509 is Optional on the following programmes:

School of Management
  • UMMN-AFB02 : BSc (hons) Accounting and Finance (Full-time) - Year 3
  • UMMN-AKB02 : BSc (hons) Accounting and Finance (Full-time with Thick Sandwich Placement) - Year 4
  • UMMN-ANB01 : BSc (hons) Business Administration (Full-time with Thin Sandwich Placements) - Year 4

* This unit catalogue is applicable for the 2013/4 academic year only. Students continuing their studies into 2014/15 and beyond should not assume that this unit will be available in future years in the format displayed here for 2013/14.
* Programmes and units are subject to change at any time, in accordance with normal University procedures.
* Availability of units will be subject to constraints such as staff availability, minimum and maximum group sizes, and timetabling factors as well as a student's ability to meet any pre-requisite rules.