Behavioral finance (FIN304)
Vietnamese title: Tài chính hành vi
Credits: 3
Prerequisites: FIN202, FIN303

Description:
This course aims to introduce students to behavioral theories of finance and financial decision making. Behavioral foundations including biases; heuristics; and
framing effects, will be examined. It then can compare and contrast rational and behavioral theories of finance and financial decision making. This extends students’ knowledge of finance
by demonstrating how “real” investors and markets do not always correspond to the rational agents and outcomes described in standard finance courses.

Learning outcomes:
Critically review the foundations of conventional finance;
Have a good understand of the main principles of cognitive psychology as applied in behavioural finance;
Understand the causes and nature of market anomalies;
Critically evaluate behavioural influences involving individuals’ securities pricing, financial analysis, investment decisions.
Critically evaluate behavioural influences involving corporate (executive) financial decisions.
Apply the knowledge of behavioural finance to improve investment and corporate performance.
Develop strategies to manage wealth effectively and wisely in inefficient financial markets such as mispriced assets, shocks, news.
Shows self-reliance when working independently and collaboratively
Demonstrate ethical awareness and reflection in business context

Student tasks:
- Students must attend at least 80% of contact slots in order to be accepted to the final examination.
- Student is responsible to do all exercises, assignments and labs given by instructor in class or at home and submit on time
- Use laptop in class only for learning purpose
- Promptly access to http://flm.fpt.edu.vn for up-to-date course information

Tools:
- Internet

Materials:
description: Behavioral Finance Psychology, Decision-Making, and Markets, 1st  Edition
author: Lucy Ackert, Richard Deaves
publisher: Cengage (https://au.cengage.com/c/isbn/9780324661170/?filterBy=Higher-Education#overview)
published_date: 2010
edition: 1st
isbn: ISBN-10: 1133455484 or ISBN-13: 9781133455486

Assessments:
category: Class Participation
type: on-going
weight: 10.0
duration: All sessions
question_type: LO8, LO9
no_question: Discussion questions and Constructive questions
knowledge_and_skill: Depending on the time and schedule of each session.
grading_guide: All chapters and learning materials covered in each session.
note: Classroom
category: Essay Test
type: on-going
weight: 15.0
duration: 45 minutes
question_type: LO1, LO2, LO3, LO4, LO5, LO8
no_question: MCQ, Essay questions covering both qualitative and quantitative aspects of the learning materials
knowledge_and_skill: Number of questions will depend on the lengths and difficulty levels of each question given by the lecturer.
grading_guide: All chapters and learning materials covered.
note: Classroom
category: Group Assignment
type: on-going
weight: 15.0
duration: 9 weeks
question_type: LO2, LO3, LO5, LO6 LO7, LO8, LO9
no_question: - Qualitative and discussion questions, case study discussion require students to provide their own assessment and judgement with detailed explanation in their answers.
knowledge_and_skill: Number of questions will depend on the lengths and difficulty levels of each question given by the lecturer.
grading_guide: All chapters and learning materials covered.
note: Take-Home and Classroom
category: Individual assigment
type: on-going
weight: 15.0
duration: 9 weeks
question_type: LO2, LO3, LO4, LO6, LO7, LO8, LO9
no_question: - Quantitative, Qualitative and discussion questions require students to provide their own assessment and judgement with detailed explanation in their answers and justifications regarding trading/investment strategies
knowledge_and_skill: Number of questions will depend on the lengths and difficulty levels of each question given by the lecturer.
grading_guide: All chapters and learning materials covered.
note: Take-Home
category: Mid-term test
type: on-going
weight: 15.0
duration: 45 minutes
question_type: LO1, LO2, LO3, LO4, LO8
no_question: Multiple-choice, True-False; Short-answer Questions, Essay questions covering both qualitative and quantitative aspects of the learning materials.
knowledge_and_skill: Number of questions will depend on the lengths and difficulty levels of each question given by the lecturer.
grading_guide: All chapters and learning materials covered.
note: Classroom
category: Final exam
type: Final
weight: 30.0
duration: 60 minutes
question_type: LO1, LO2, LO3, LO4, LO5, LO8
no_question: Multiple - choice questions
knowledge_and_skill: 50
grading_guide: All chapters and learning materials covered in the course.
note: Classroom

Schedule:
session: Introduce to the course
Part 1: CONVENTIONAL FINANCE, PROSPECT THEORY, AND MARKET EFFICIENCY
Chapter 1: Foundations of Finance I: Expected Utility Theory
1.1 Neoclassical Economics
learning_outcomes: I
T
materials: FIN304
session: Chapter 1: Foundations of Finance I: Expected Utility Theory (Cont)
1.2 Expected Utility Theory
1.3 Risk Attitude
learning_outcomes: T
materials: FIN304
session: Chapter 1: Foundations of Finance I: Expected Utility Theory (Cont)
1.4 Allais Paradox
learning_outcomes: T
session: Chapter 2: Foundations of Finance II: Asset Pricing,
Market Efficiency, and Agency Relationships
2.1 The Pricing of Risk
learning_outcomes: T
session: Chapter 2: Foundations of Finance II: Asset Pricing, Market Efficiency, and Agency Relationships (Cont)
2.2 Market Efficiency
learning_outcomes: T
session: Chapter 2: Foundations of Finance II: Asset Pricing, Market Efficiency, and Agency Relationships (Cont)
2.3 Agency Theory
2.4 From Rationality to Psychology
learning_outcomes: T
session: Chapter 4: Challenges to Market Efficiency
4.1 Some Key Anomalies
4.2 Noise-Trading and Limits to Arbitrage
learning_outcomes: T
session: Chapter 4: Challenges to Market Efficiency (Cont)
4.2 Noise-Trading and Limits to Arbitrage (Cont)
learning_outcomes: T
session: Practice and review Chapter 1, 2, and 4
Individual and Group assignment handout
learning_outcomes: U
session: Practice and review Chapter 1, 2, and 4
Individual and Group assignment handout
learning_outcomes: U
session: Chapter 3: Prospect Theory, Framing, and Mental Accounting
3.1 Prospect Theory
learning_outcomes: T
session: Chapter 3: Prospect Theory, Framing, and Mental Accounting (cont)
3.1 Prospect theory (Cont)
3.2 Framing
learning_outcomes: T
session: Chapter 3: Prospect Theory, Framing, and Mental Accounting (cont)
3.3 Mental Accounting
learning_outcomes: T
session: PART 2: BEHAVIORAL SCIENCE FOUNDATION AND INVESTOR BEHAVIOR
Chapter 5: Heuristics and Biases
5.1 Perception, Memory, and Heuristics
learning_outcomes: T
session: Chapter 5: Heuristics and Biases (Cont)
5.2 Familiarity and Related Heuristics
5.3 Representativeness and Related Biases
learning_outcomes: T
session: Chapter 5: Heuristics and Biases (Cont)
5.3 Anchoring
5.4 Irrationality and Adaptation
5.5 Looking Ahead
learning_outcomes: T
session: Chapter 8: Implications of Heuristics and Biases for Financial Decision-Making
8.1 Financial Behaviors Stemming from Familiarity
8.2 Financial Behaviors Stemming from Representativeness
learning_outcomes: T
session: Chapter 8: Implications of Heuristics and Biases for Financial Decision-Making (Cont)
8.2 Financial Behaviors Stemming from Representativeness (Cont)
8.3 Anchoring to Available Economic Cues
learning_outcomes: T
session: Practice and Review Chapter 3, 5, and 8
learning_outcomes: U
session: Practice and Review Chapter 3, 5, and 8
learning_outcomes: U
session: Chapter 6: Overconfidence
6.1 Miscalibration
learning_outcomes: T
session: Chapter 6: Overconfidence (Cont)
6.2 Other Strains of Overconfidence
learning_outcomes: T
session: Chapter 6: Overconfidence (Cont)
6.3 Factors Impeding Correction
Chapter 9: Implications of Overconfidence for Financial Decision-Making
9.1 Overconfidence and Excessive Trading
learning_outcomes: T
session: Chapter 9: Implications of Overconfidence for Financial Decision-Making (Cont)
9.1 Overconfidence and Excessive Trading (Cont)
9.2 Demographics and Dynamics
learning_outcomes: T
session: Chapter 9: Implications of Overconfidence for Financial Decision-Making (Cont)
9.3 Underdiversification and Excessive Risk Taking
9.4 Excessive Optimism and Analysts
learning_outcomes: T
session: Practice and Review Chapter 6, and 9
learning_outcomes: U
session: Practice and Review Chapter 6, and 9
learning_outcomes: U
session: Chapter 7: Emotional Foundations
7.1 The Substance of Emotion
7.2 A Short History of Emotion Theory
7.3 Evolutionary Theory
learning_outcomes: I
session: Chapter 7: Emotional Foundations (Cont)
7.5 Emotion and Reasoning
7.6 Our Minds, Bodies, and Emotion
learning_outcomes: I
session: Chapter 10: Individual Investors and the Force of Emotion
10.1 Is the Mood of the Investor the Mood of the Market?
10.2 Pride and Regret
10.3 The Disposition Effect
learning_outcomes: T
session: Chapter 10: Individual Investors and the Force of Emotion (Cont)
10.3 The Disposition Effect
10.4: House Money
10.5 Affect
learning_outcomes: T
session: Practice and Review Chapters covered so far
learning_outcomes: U
session: Practice and Review Chapters covered so far
learning_outcomes: U
session: Mid-term test
session: Part 3: SOCIAL FORCES
Chapter 11: Social Forces: Selfishness or Altruism?
11.1 Homo Economicus
11.2 Fairness, Reciprocity, and Trust
learning_outcomes: T
session: Chapter 11: Social Forces: Selfishness or Altruism? (Cont)
11.3 Social Influences Matter
11.4 Conformity
learning_outcomes: T
session: Chapter 11: Social Forces: Selfishness or Altruism? (Cont)
11.5 Social Behavior and Emotion
Chapter 12: Social Forces at Work: The Collapse of an American Corporation
12.1 Corporate Boards
learning_outcomes: T
session: Chapter 12: Social Forces at Work: The Collapse of an American Corporation (Cont)
12.2 Analysts
12.3 Enron
learning_outcomes: T
session: Chapter 12: Social Forces at Work: The Collapse of an American Corporation (Cont)
12.3 Enron
learning_outcomes: T
session: Practice and Review Chapters 11 and 12
learning_outcomes: U
session: PART 4: MARKET OUTCOMES
Chapter 13: Behavioral Explanations for Anomalies
13.1 Earnings Announcements and Value vs. Growth
learning_outcomes: T
session: Chapter 13: Behavioral Explanations for Anomalies (Cont)
13.2 What is Behind Momentum and Reversal?
learning_outcomes: T
session: Chapter 13: Behavioral Explanations for Anomalies (Cont)
13.3 Rational Explanation
learning_outcomes: T
session: Chapter 14: Do Behavioral Factors Explain Stock Market Puzzles?
14.1 The Equity Premium Puzzle
14.2 Real-World Bubbles
14.3 Experimental Bubbles Markets
learning_outcomes: T
session: Chapter 14: Do Behavioral Factors Explain Stock Market Puzzles? (Cont)
14.4 Behavioral Finance and Market Valuations
14.5 Excessive Volatility
14.6 Markets in 2008
learning_outcomes: T
session: Practice and Review Chapters 13 and 14
learning_outcomes: U
session: PART 5: CORPORATE FINANCE
Chapter 15: Rational Managers and Irrational Investors
15.1 Mispricing and the Goals of Managers
15.2 Examples of Managerial Actions Taking Advantage of Mispricing (Cont)
learning_outcomes: T
session: Chapter 15: Rational Managers and Irrational Investors (Cont)
15.2 Examples of Managerial Actions Taking Advantage of Mispricing
learning_outcomes: T
session: Chapter 15: Rational Managers and Irrational Investors (Cont)
15.3 Irrational Managers or Irrational Investors?
Chapter 16: Behavioral Corporate Finance and Managerial Decision-Making
16.1 Capital Budgeting: Ease of Processing, Loss Aversion, and Affect
learning_outcomes: T
session: Chapter 16: Behavioral Corporate Finance and Managerial Decision-Making (Cont)
16.1 Capital Budgeting: Ease of Processing, Loss Aversion, and Affect
16.2 Managerial Overconfidence
learning_outcomes: T
session: Chapter 16: Behavioral Corporate Finance and Managerial Decision-Making (Cont)
16.3 Investment and Overconfidence
16.4 Can Managerial Overconfidence Have a Positive Side?
learning_outcomes: T
session: Practice and Review Chapters 15 and 16
learning_outcomes: U
session: Practice and Review Chapters 15 and 16
learning_outcomes: U
session: Review
learning_outcomes: U
session: Essay test
session: Group presentation
Individual assignment submission
learning_outcomes: U
session: Group presentation
learning_outcomes: U
session: Group presentation
learning_outcomes: U
session: Group presentation
learning_outcomes: U
session: Group presentation
learning_outcomes: U