Lecture

Behavioral Finance

Name in diploma supplement

Behavioral Finance

Organisational Unit

Lehrstuhl für Finanzierung

Lecturers

Prof. Dr. Heiko Jacobs

SPW

2

Language

English

Cycle

winter semester

Participants at most

no limit

Participants

• BWL EaF MasterWahlpflichtbereich 1.-3. Sem, Elective, Module Behavioral Finance
• LA gbF/kbF BK MasterMasterprüfung in der kleinen beruflichen FachrichtungFinanz- und Rechnungswesen, SteuernWahlpflichtbereich Kleine berufliche Fachrichtung "Finanz- und Rechnungswesen, Steuern" 1.-3. Sem, Elective, Module Behavioral Finance
• MuU MasterWahlpflichtbereich IIWahlpflichtbereich II B.: Märkte und Unternehmen aus Marktperspektive 1.-3. Sem, Elective, Module Behavioral Finance
• VWL MasterWahlpflichtbereich II 1.-3. Sem, Elective, Module Behavioral Finance

Preliminary knowledge

Students are assumed to have undergraduate level knowledge of finance and economics. Some basic knowledge of statistics/econometrics is helpful to understand empirical research conducted in the research papers, which the course content is based on. A sufficient level of spoken and written English language skills is necessary.

Abstract

There is abundant evidence suggesting that the standard economic paradigm of rational individuals does not perfectly describe behavior in financial markets. Behavioral Finance examines how individuals' attitudes and behavior affect their financial decisions. This course reviews research on psychological biases and non-standard preferences in investor behavior, highlights the link between individual behavior and market outcomes, and discusses some of the major empirical “puzzles” in financial markets for which standard finance theory provides no sufficient explanation.

Contents

• An Introduction to Behavioral Finance
• Market Participants: Judgment Biases
• Market Participants: Purchasing and Selling Decisions
• Market Participants: Experience, Social Networks, Retirement Saving
• Linking Individual Behavior and Market Outcomes
• Markets: Efficiency and Limits to Arbitrage
• Markets: Event Studies
• Markets: Time Series Properties and Calendar Anomalies
• Markets: Cross-Sectional Predictability

Literature

As the course discusses partly recent research, there is no specific textbook that covers all aspects of the course. However, useful survey papers for this course are:

• Barber, B. M., & Odean, T. (2013). Chapter 22 – The Behavior of Individual Investors. In: Handbook of the Economics of Finance  (Vol. 2, pp. 1533–1570).
• Barberis, N., & Thaler, R. (2003). A survey of behavioral finance. Handbook of the Economics of Finance, (Vol. 1, pp. 1053-1128).
• Hirshleifer, D. A. (2015). Behavioral finance. In: Annual Review of Financial Economics (Vol. 7, pp. 133-159).

Teaching concept

The course is held in the form of lectures.