KTTS4160 Behavioral Finance (5 op)

The lecture course gives a systematic treatment of behavioral finance starting from the arguments - limits to arbitrage and investor psychology - on which the approach is based on. Important concepts are heuristics, representativeness, overconfidence, anchoring, mental accounting, and disposition effect. The lecture course gives a thorough treatment of the key theories including the behavioral asset pricing theory by Shefrin and the prospect theory. Discussion of empirical evidence covers option markets, yield curve determination, and behavioral corporate finance in addition to the stock markets. The course also integrates fresh perspectives from Shiller’s narrative economics to better understand the role of narratives in financial decision-making and market dynamics.

After completion of the lecture course a student is able to:

 - understand how behavioral patterns impact asset pricing;

 - analyze impact of investor sentiment on market behavior:

 - apply behavioral principles to evaluate market dynamics.

Meta Skills: 

The Behavioral Finance lecture course develops student's analytical skills in understanding and analyzing human behavior both as individuals and as groups.

Lectured in 4th period.

Lecture material and a textbook