COURSE UNIT TITLE

: BEHAVIORAL FINANCE

DEGREE PROGRAMMES

Description of Individual Course Units

Course Unit Code Course Unit Title Type Of Course D U L ECTS
MSF 5074 BEHAVIORAL FINANCE ELECTIVE 3 0 0 4

Offered By

Accounting and Finance (English)

Level of Course Unit

Second Cycle Programmes (Master's Degree)

Course Coordinator

PROFESSOR PINAR EVRIM MANDACI

Offered to

Accounting and Finance (English)

Course Objective

The aim of the course is to provide an in-depth discussion of psychological foundations of financial decision making and its impact on asset pricing and financial makers. Topics include the expected utility theory, the discounted utility model, rational learning, bubbles, noise trades, overconfidence and optimism, prospect theory, overreaction, underreaction and behavioral corporate finance.

Learning Outcomes of the Course Unit

1   Explain the basic mechanics of utility theory for evaluating risky outcomes.
2   Use time varying and especially falling discount into an asset pricing models.
3   Understand why investors may not learn in a rational Bayesian way and how this process of learning impacts asset pricing models.
4   Evaluate the discussions of optimism, overreaction and herding by considering the historical financial bubbles.
5   Explain the role of noise traders in asset pricing.
6   Examine the impact of optimism upon behavior and the determination of asset price returns in financial markets.
7   Explain the effect of prospect theory on asset pricing and financial behavior.
8   Examine the roots of herding in human psychology and its impact on asset prices.
9   Evaluate insiders trading and its damaging consequences for healthy functioning of financial markets.
10   Understand the nature of puzzle surrounding the equity premium.
11   Interpret the problems of standard finance theory by considering the realities of how firms make decisions, as opposed to what happens when they have decided.

Mode of Delivery

Face -to- Face

Prerequisites and Co-requisites

None

Recomended Optional Programme Components

None

Course Contents

Week Subject Description
1 Financial Decision Making: The Expected Utility Theory
2 The Discounted Utility Model
3 Rational Learning
4 Bubbles
5 Noise Traders
6 Overconfidence and Optimism
7 The Prospect Theory
8 Midterm
9 Overreaction-Underreaction
10 Herding
11 Insider Trading
12 Equity Premium Puzzle
13 Incorporation
14 Review

Recomended or Required Reading

William Forbes, Behavioural Finance, 1. Edition 2009, John Wiley and Sons.

Planned Learning Activities and Teaching Methods

Lecture, article discussions, case studies.

Assessment Methods

SORTING NUMBER SHORT CODE LONG CODE FORMULA
1 MTE MIDTERM EXAM
2 STT TERM WORK (SEMESTER)
3 FIN FINAL EXAM
4 FCG FINAL COURSE GRADE MTE * 0.30 + STT * 0.30 + FIN* 0.40
5 RST RESIT
6 FCGR FINAL COURSE GRADE (RESIT) MTE * 0.30 + STT * 0.30 + RST* 0.40


Further Notes About Assessment Methods

None

Assessment Criteria

1. The students will use basic concepts of behavioral finance in financial decision making.
2. The students will explain the effects of the characteristics of individual behaviors on investment decisions.
3. The students will evaluate the effect of investors psychology on risk tolerance.
4. The students will evaluate the behavioral critique and bubbles
5. The students will examine the impact of the philological profiles of investors on individual investment behavior
6. The students will explain the main concepts and issues in the area of behavioral finance

Language of Instruction

English

Course Policies and Rules

1. Plagiarism of any type will result in disciplinary action.
2. Attending at least 70 percent of lectures is mandatory.
3. All assignments should be submitted on time. Otherwise will not be accepted.

Contact Details for the Lecturer(s)

banu.durukan@deu.edu.tr

Office Hours

To be announced.

Work Placement(s)

None

Workload Calculation

Activities Number Time (hours) Total Work Load (hours)
Lectures 13 3 39
Preparing assignments 10 1 10
Preparation for midterm exam 1 15 15
Preparation for final exam 1 20 20
Preparations before/after weekly lectures 12 2 24
Final 1 2 2
Midterm 1 2 2
TOTAL WORKLOAD (hours) 112

Contribution of Learning Outcomes to Programme Outcomes

PO/LOPO.1PO.2PO.3PO.4PO.5PO.6PO.7
LO.15555454
LO.25554354
LO.35453354
LO.45555454
LO.55445454
LO.65445554
LO.75554454
LO.85554455
LO.95445554
LO.105554454
LO.115554455

CONTACT INFORMATION
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Phone: +90(232) 412 12 12 - Fax: +90 (232) 464 81 35

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