Behavioural Finance is not just another branch of finance. It is the study of the influence of psychology on the behavior of human beings in their financial decision-making. It helps us in studying its subsequent effects on the financial markets. It highlights the fact that human beings are not always rational, have limits to their self-control, and are influenced by their own biases. It is the study of how investors systematically make errors in judgement, or “mental mistakes”. Behavioural finance is a relatively new field in economics and has become an interesting topic for investment professionals.
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The course is aimed at beginners who want to understand the complex, yet interesting aspects of behavioural finance. The course will start with an introduction to basics of behavioural finance and how it impacts financial markets. The most common self-deception biases, cognitive biases, and emotional biases will then be discussed at length with appropriate examples and real-life case studies. We will discuss the causes and potential measures required to manage these biases. We will also discuss loss aversion and herding biases which have a great impact on the minds of investors. The course concludes with a section on the impact of unforeseen circumstances on the behavioural aspects of finance.
What you'll learn
- How wide range of decision-making biases and information processing errors impact our financial decision-making
- How behavioural finance impacts financial markets
- The most common self-deception biases, their causes, and potential measures to prevent them
- Cognitive biases and their root causes with real life examples
- The most common emotional biases and their causes with examples
- How loss aversion and other biases that contribute to our financial decision- making
- How herding bias and other social factors interfere with our decision-making
Syllabus
Overview of Behavioural Finance
- Entropic Mind Leading to Self-Deception
- Cognitive Biases in Financial Decision Making
- Emotional and Social Biases in Financial Decision Making
