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APPLIES TO ACADEMIC YEAR 2015/2016FIN 3617Behavioural FinanceResponsible for the courseCostas XiourosDepartmentDepartment of Financial EconomicsTermAccording to study planECTS Credits7,5Language of instructionEnglishIntroductionThe objective of this course is to provide bachelor students with a broad understanding of how humanpsychology affects financial decisions, with specific reference to the impact on financial markets,corporate finance, and personal financial decisions. As such, the course focuses on how the insightsof behavioral finance complement the traditional paradigm in explaining various features of thefinance world; namely corporate and individual financial decisions as well as the efficiency of thefinancial markets.The course will shed light on the behavior of investors and managers (and hence corporate financialpolicies) as well as on explaining asset pricing anomalies. To this end, we will examine how peoplemake predictable and repeatable mistakes in financial decision-making. We will describe the nature ofthese mistakes and their origin, using insights from psychology, neurosciences and experimentaleconomics on how the human mind works. We will then discuss how incorporating these mistakesinto our finance theories can markedly improve standard finance models studied in other courses. Wewill also consider how understanding the functioning of the human mind allows us to design a betterworld, e.g. better stock markets, retirement plans, etc. As such, this course is markedly multi-disciplinary, lying at the intersection of financial economics, a wide spectrum of disciplines outsidefinance (such as psychology, medicine, and sociology), and will include practical examples,experiments, and illustrations.Learning outcomeAcquired KnowledgeStudents will acquire a good understanding of behavioral biases among investors and how thesebiases affect the market outcomes. More specifically the students will develop their understandingwith respect to the following topics:Behavioral biases among individualsHow do behavioral biases affect financial decision-making?Why do some people gamble? Why do the elderly take excessive risks? Why do people savetoo little?
How can “bubbles” be explained?

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