Total Lecture Hours: 40
The objective of this course is to cover the behavioural aspects of financial decision making and personal finance planning. The students shall be introduced to the theoretical, mathematical, and empirical underpinnings of anomalies and biases that investors face in financial markets. The course also focuses on the behavioural approach of investment and personal financial planning.
Module 1: 5 Hours
Introduction to behavioural economics and finance: the concept of expected utility, the Von Neumann–Morgenstern framework.
- Introduction to Behavioral Economics and Finance
- Economics of Decision Making
- Decision Making Under Risk and Uncertainty
Module 2: 5 Hours
Non-expected utility preferences and its applications in finance.
- Non-expected Utility Preferences
- Prospect Theory and Behavioral Biases
- Prospect Theory and Behavioral Finance
Module 3: 5 Hours
Beliefs, biases and heuristics in financial markets.
- Beliefs, Biases and Heuristics
- Biases and Financial Decision-Making
- Overconfidence and Investor Behavior
Module 4: 5 Hours
Basics of personal finance, financial planning, and budgeting.
- Valuation of Financial Assets
- Portfolio Return and Risk
- Personal Financial Goals
- Planning Personal Finances
- Cash Flow Statement, Personal Balance Sheet
Module 5: 5 Hours
Investment decision making and behavioural finance
- Taxes and Financial Planning
- Portfolios for Individual Investors
Module 6: 5 Hours
Investment strategies for individual investors.
- Investment Alternatives for Individual Investors
- Investing in Mutual Funds
- Fixed Income Investments
Module 7: 5 Hours
Purchasing decisions, consumer credit and related issues.
- Purchasing Decisions
- Consumer Credit Decisions
- Loans and Amortization
- Credit Card as Source of Consumer Credit
Module 8: 5 Hours
Alternative investment and structured finance.
- Alternative Investments
- Structured Finance
- Wealth Management
BOOKS AND REFERENCES
- Behavioral Finance, William Forbes, Wiley, 2019.
- Behavioral Finance: Psychology, Decision-Making and Markets, L. F. Ackert and R. Deaves, South-Western College Publication.
- Investor Behavior: The Psychology of Financial Planning and Investing, H K Baker and V Ricciardi, Wiley, 2020.
- Personal Finance (11th ed.), Jack Kapoor, Les Dlabay and R. J. Hughes, McGraw Hill.