25770 Behavioural Finance
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particular session, location and mode of offering is the authoritative source
of all information about the subject for that offering. Required texts, recommended texts and references in particular are likely to change. Students will be provided with a subject outline once they enrol in the subject.
Subject handbook information prior to 2024 is available in the Archives.
Credit points: 6 cp
Subject level:
Postgraduate
Result type: Grade and marksRequisite(s): ((25742c Financial Management OR 25799c Financial Management) AND 25741c Capital Markets)
The lower case 'c' after the subject code indicates that the subject is a corequisite. See definitions for details.
These requisites may not apply to students in certain courses.
There are course requisites for this subject. See access conditions.
Anti-requisite(s): 25892 Behavioural Finance: Heuristics and Biases AND 25893 Behavioural Finance: Prospect Theory
Description
This subject provides students with the theoretical knowledge and practical tools necessary to understand how financial decisions are made in a vast array of settings, incorporating insights from individual and social psychology in modern financial theory.
Students will learn to understand the most common “rules of thumb” in financial decision-making, identify potential biases and mistakes that can arise. The course focuses around three pillars:
- Individuals: how do we make saving and investing decisions? What biases can cloud our decisions? What mistakes are commonly made?
- Professionals: do advisors/managers exhibit similar biases? How do advisors/managers behave if markets are not efficient?
- Financial Markets: are markets fully efficient? Are stock returns predictable?
The subject is based on a hands-on approach whereby students will develop and reinforce a set of analytical tools related to financial advice and investment decisions. We'll also consider how behavioural principles can help develop new financial services and products for consumers.
Subject learning objectives (SLOs)
| 1. | evaluate the different types of behavioural biases client(s) exhibit |
|---|---|
| 2. | link behavioural biases, demographics, financial literacy and investment mistakes to ensure best interest outcome for the client |
| 3. | assess the implications for investment decisions and the client-advisor relationships |
| 4. | implement best practices to ensure tailored advice that is in line with ethical and professional standards |
| 5. | critically analyse the foundations of efficient markets ('economically rational') and markets with anomalies ('partially rational' or 'irrational') |
Contribution to the development of graduate attributes
This subject provides students with a deep understanding of behavioural finance, behavioural biases and psychology in consumer financial decision making. This process will involve creative thinking and the application and combination of knowledge from different disciplines to client engagement, the professional client relationship in the financial services context. Students will learn to communicate effectively both verbally and non- verbally and engage positively in dealings with clients and peers. As such this subject contributes particularly to the development of these graduate attributes:
- Intellectual rigour and innovative problem solving
- Social responsibility and cultural awareness
Teaching and learning strategies
This subject is based on collaborative learning activities that include online material and activities, lectures, in-class discussions and applied case studies. The online material and activities will develop students’ technical knowledge about the financial planning process. The lectures will explain the application of the process using a case study framework. Students will actively discuss the case studies with the instructor and peers based on the knowledge from the online material.
Content (topics)
- Biases in human judgement and financial decisions
- Most common investment mistakes
- Biases and retirement savings
- Behavioural biases of financial advisors
- Individual biases and market efficiency (or lack thereof)
- Deviations from fundamental value: momentum and other market anomalies
Assessment
Assessment task 1: Quiz on the content of the online learning component*
| Objective(s): | This addresses subject learning objective(s): 1, 3, 4 and 5 |
|---|---|
| Type: | Quiz/test |
| Groupwork: | Individual |
| Weight: | 20% |
| Length: | Each quiz is 30 minutes in duration and consists of multiple choice and short answer questions. |
| Criteria: | *Note: Late submission of the assessment task will not be marked and awarded a mark of zero. |
Assessment task 2: Individual assignment
| Objective(s): | This addresses subject learning objective(s): 1, 2, 3, 4 and 5 |
|---|---|
| Type: | Report |
| Groupwork: | Individual |
| Weight: | 30% |
| Length: | Submissions should not exceed 10 pages of (12 font, 1.5 spacing and 2cm margins) including title page, table of contents and references. |
Assessment task 3: Individual presentation*
| Objective(s): | This addresses subject learning objective(s): 1, 2, 3, 4 and 5 |
|---|---|
| Type: | Presentation |
| Groupwork: | Individual |
| Weight: | 10% |
| Length: | *Note: Late submission will incur a loss of marks where 10 percent (10%) of the marks for the assessment task |
Assessment task 4: Written final exam (open book)
| Objective(s): | This addresses subject learning objective(s): 1, 2, 3, 4 and 5 |
|---|---|
| Type: | Examination |
| Groupwork: | Individual |
| Weight: | 40% |
Minimum requirements
Students must achieve at least 50% of the subject’s total marks.
Required texts
Mandatory reading and other learning material will be placed on Canvas as far as copyright laws allow.
Ackert, L. F. and Deaves, R., 2010. Behavioural Finance: Psychology, Decision- Making, and Markets. Cengage.
Kahneman, D. and Egan, P., 2011. Thinking, fast and slow. New York: Farrar, Straus and Giroux.
Recommended texts
Links to material will be placed on Canvas as far as copyright laws allow.
Ackert, L. F. and Deaves, R., 2010. Behavioural Finance: Psychology, Decision- Making, and Markets. Cengage.
Bazerman, M. H. and Moore, D. A., 2013. Judgment in Managerial Decision Making. Wiley.
Kahneman, D. and Egan, P., 2011. Thinking, fast and slow. New York: Farrar, Straus and Giroux.Thaler, R.H. and Sunstein, C.R., 2009. Nudge: Improving decisions about health, wealth, and happiness. Penguin.
Thaler, R.H. and Ganser, L.J., 2015. Misbehaving: The making of behavioral economics. New York: WW Norton.Zacks, L. ed., 2011. The handbook of equity market anomalies: translating market inefficiencies into effective investment strategies (Vol. 2). John Wiley & Sons.