Code: | 2MiF22 | Acronym: | FC |
Keywords | |
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Classification | Keyword |
OFICIAL | Management Studies |
Active? | Yes |
Course/CS Responsible: | Master in Finance |
Acronym | No. of Students | Study Plan | Curricular Years | Credits UCN | Credits ECTS | Contact hours | Total Time |
---|---|---|---|---|---|---|---|
MIF | 46 | Official Syllabus after 2020-2021 | 1 | - | 3 | 21 | 81 |
Over the past several decades, financial theory has been based on the assumption that investors and managers are generally rational and that the prices of securities are generally efficient. However, recent studies suggest that markets are not efficient and that investors and managers are not fully rational. Behavioral finance offers a more realistic view of economic agents’ decision making. It argues that many facts about asset prices, investor behavior, and managerial behavior are best understood using models where at least some agents are not fully rational. In particular, behavioral finance uses psychological evidence to model investor and manager behavior in order to get a better understanding of the financial phenomena. The purpose of this course is to introduce the students to the new field of behavioral finance.
Upon completion of this course, students will be able to have a good understanding of the major concepts of behavioral finance and to apply these concepts across a range of different economic environments.
1. Behavioral Finance vs. Rational Finance
1.1. How do we decide?
1.2. Definition of behavioral finance
1.3. The behavioral-rational debate in financial economics
2. Weaknesses of the Rational Paradigm
2.1. Concepts of market efficiency
2.2. The impact of information on prices
2.3. Weaknesses of the rational paradigm
2.4. Empirical evidence
3. Investor Behavior
3.1. Emotional and cognitive biases
3.2. The role of emotion in decision-making
3.3. The impact of external factors
3.4. Herding behavior
3.5. Empirical evidence
4. Limits to Arbitrage
4.1. The importance of arbitrage
4.2. Limits to arbitrage
4.3. Empirical evidence
4.4. An assessment: theories in Finance
5. Alternative Asset Pricing Models
5.1. The impact of heterogeneous investors
5.2. The survival of non-rational investors in the market
5.3. Behavioral models
5.4. Models with heterogeneous expectations
6. The Human Factor in Corporate Finance
6.1. Biased managers
6.2. Biased Entrepreneurs
6.3. Biased financial decisions in the firm
6.3.1. Capital budgeting decisions
6.3.2. Financing decisions
6.3.3. Dividend decisions
6.3.4. Mergers and acquisitions
6.4. Rational managers and non-rational investors
7. The Behavioral Perspective (way) beyond Finance
The class will be a mixture of lecture and discussion. Theories, practices, and real-world examples will be examined and analyzed.
Designation | Weight (%) |
---|---|
Exame | 50,00 |
Participação presencial | 10,00 |
Trabalho escrito | 40,00 |
Total: | 100,00 |
Designation | Time (hours) |
---|---|
Frequência das aulas | 0,00 |
Total: | 0,00 |
Distributed evaluation with final exam. Grades will be based on the final exam (50%), group work (40%) and class participation (10%). The students are required to have done the group work in order to have access to the final exam (article 9, n. 1, a) of the grading rules)