NBS8200 : Behavioural Finance
NBS8200 : Behavioural Finance
- Offered for Year: 2024/25
- Module Leader(s): Professor Bartosz Gebka
- Owning School: Newcastle University Business School
- Teaching Location: Newcastle City Campus
Semesters
Your programme is made up of credits, the total differs on programme to programme.
Semester 2 Credit Value: | 10 |
ECTS Credits: | 5.0 |
European Credit Transfer System | |
Pre-requisite
Modules you must have done previously to study this module
Pre Requisite Comment
N/A
Co-Requisite
Modules you need to take at the same time
Code | Title |
---|---|
NBS8332 | Financial Theory |
Co Requisite Comment
Financial Theory covers foundations of Finance, Behavioural Finance is based on criticism of those foundations.
Aims
Behavioural finance (BF) is an unorthodox area of finance that assumes financial markets are fundamentally inefficient. Advocates of BF believe that investor behaviour and decision making are driven by aspects of personal and market psychology. This course will involve an introduction to BF followed by a detailed analysis of the main issues. At the conclusion of the module students should be able to demonstrate:
– an advanced understanding of the main concepts in BF,
– a comprehensive familiarity with the latest empirical research developments in the BF subject area,
– a critical understanding of the limits of BF,
– the ability to undertake self-directed empirical research in this area,
– and to be able to apply empirical methods to understand and explain important issues in the area of BF.
Outline Of Syllabus
1. Introduction: What is ‘traditional’ view in finance, challenges of the traditional view, behavioural finance as an alternative approach
Part 1: The Traditional View
2. ‘Traditional’ finance theory: utility analysis, portfolio theory, asset pricing models, arbitrage, rational stock valuation
3. Efficient market hypothesis: theoretical underpinnings of the EMH, empirical evidence, irrational investors and market efficiency
Part 2: Limits to Arbitrage
4. Noise trader risk and arbitrage: risk due to noise trader activities, limited arbitrage and its consequences for the EMH
5. Investor sentiment and closed-end funds: irrational investors and their systematic impact on stock prices, empirical evidence
6. Agency theory and limits of arbitrage: agency theory and fund managers’ behaviour, limited arbitrage and the consequences for stock prices
Part 3: Irrational Investors and Managers
7. Investor psychology: rational behaviour, deviations from rationality in investor’s preferences and beliefs, prospect theory and cognitive biases
8. A model of investor sentiment: investment decisions driven by representativeness and conservatism, deviations from market efficiency
9. Behavioural corporate finance: managerial decision making and exploitation of market inefficiencies, managers and investors as irrational individuals
Part 4: Applications
10. How is the knowledge of behavioural finance helping us to better deal with money? Pensions decisions, advising your clients, portfolio management including technical trading
Learning Outcomes
Intended Knowledge Outcomes
Upon successful learning on this module:
- You will have an advanced understanding of important theoretical concepts in behavioural finance and a comprehensive familiarity with the latest empirical research developments in the behavioural finance area;
- You will be able to recognize and critically discuss the advantages and limitations of those theoretical and empirical arguments in the context of financial research;
- You will have the ability to critically analyse real-life financial decisions in the light of behavioural arguments, and to construct a comprehensive and balanced set of conclusions and recommendations, which will also prepare you for undertaking empirical research in this area.
Intended Skill Outcomes
Upon successful engagement on this module, you will be able to identify and evaluate in-depth the relevant literature and to apply your knowledge of empirical methods to comprehend, extensively explain and effectively communicate your understanding and systematic conclusions on important issues in the area of behavioural finance.
Teaching Methods
Teaching Activities
Category | Activity | Number | Length | Student Hours | Comment |
---|---|---|---|---|---|
Scheduled Learning And Teaching Activities | Lecture | 14 | 1:00 | 14:00 | Present in Person |
Guided Independent Study | Assessment preparation and completion | 1 | 33:00 | 33:00 | N/A |
Guided Independent Study | Directed research and reading | 1 | 25:00 | 25:00 | N/A |
Scheduled Learning And Teaching Activities | Small group teaching | 3 | 1:00 | 3:00 | Present in Person |
Guided Independent Study | Independent study | 1 | 25:00 | 25:00 | N/A |
Total | 100:00 |
Teaching Rationale And Relationship
Lectures provide the basic structure of the theories and empirical evidence that are introduced and an overview of the current research issues.
Seminars provide an opportunity to discuss and enhance understanding of the empirical and theoretical aspects of the module.
Reading Lists
Assessment Methods
The format of resits will be determined by the Board of Examiners
Other Assessment
Description | Semester | When Set | Percentage | Comment |
---|---|---|---|---|
Essay | 2 | M | 100 | Written essay 2000 word limit. |
Formative Assessments
Formative Assessment is an assessment which develops your skills in being assessed, allows for you to receive feedback, and prepares you for being assessed. However, it does not count to your final mark.
Description | Semester | When Set | Comment |
---|---|---|---|
Prob solv exercises | 2 | M | to be discussed in seminars |
Research proposal | 2 | M | optional consultation on assignment draft |
Prob solv exercises | 2 | M | to be discussed in seminars |
Prob solv exercises | 2 | M | to be discussed in seminars |
Assessment Rationale And Relationship
The essay tests understanding of a chosen topic in BF in the wider context of the module, and should include both theoretical/ analytical considerations as well as empirical analyses in the field.
Timetable
- Timetable Website: www.ncl.ac.uk/timetable/
- NBS8200's Timetable
Past Exam Papers
- Exam Papers Online : www.ncl.ac.uk/exam.papers/
- NBS8200's past Exam Papers
General Notes
N/A
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The information contained within the Module Catalogue relates to the 2024 academic year.
In accordance with University Terms and Conditions, the University makes all reasonable efforts to deliver the modules as described.
Modules may be amended on an annual basis to take account of changing staff expertise, developments in the discipline, the requirements of external bodies and partners, and student feedback. Module information for the 2025/26 entry will be published here in early-April 2025. Queries about information in the Module Catalogue should in the first instance be addressed to your School Office.