During several decades financial theories have been guided by efficient markets theory. The key assumption of the major financial models is the rational behaviour of investors and other agents. But in reality this assumption is regularly being broken. Markets are often inefficient. Information disclosure is expensive. Sunny weather or upcoming vacations may change the investors’ behaviour and bias their decisions. Each investment decision depends on our previous investment decisions: we are anchored. We do not live in vacuum.
Behavioural biases attracted the attention of the academia and investors’ world in late 1990s. The key question was whether these biases from the rational behaviour might have significant impact over market estimations and investment decisions. Empirical tests demonstrate that behavioural biases may significantly change even classical asset pricing models. Several bestsellers were written on the behavioural finance issues during 2000s. CFA curriculum part devoted to behavioural finance becomes larger and larger every year.
Behavioural biases do matter. So, if you want to be successful as a portfolio manager or individual investor, as a CFO or independent director and of course as a consulter, you should take into account different behavioural biases.
Based on key concepts of cognitive psychology decision theory, behavioural finance studies how real-life investors interpret and act on available information. This course is a finance course of advanced level.
The key goal of this course is to provide the student with sufficient knowledge to understand difference between the classical financial theory and behavioural finance. The course is focused on the specific features of decision-making process in a market that is not strongly efficient.
To follow this course the course of corporate finance is a prerequisite.