20511 Financial Metrics for Decision Making

Description

This subject serves as an introduction to financial decision-making and the role of (big) data in financial decisions. It enables students to make smart decisions, such as management finance decisions, personal savings decisions and investment decisions. The starting point is the traditional paradigm, which assumes that individuals have rational beliefs (with Bayesian updating when new information arrives) and the objective of maximising their expected utilities. This view is enriched, using models of decision-making based on research in psychology, which allow for beliefs that are not fully rational, as well as for alternative preferences and limits to cognition. Using real data, students calculate the metrics used to make financial decisions, they learn how to apply decision-making rules to those metrics, and they discover the systematic pitfalls and biases that plague decision-making, as well as techniques for overcoming them.