FINC 222 - Behavioral Finance

3 Credits
This class is an introduction to the effect of psychology on the behavior of people in the financial field, such as portfolio managers, financial planners, investors, brokers, etc. The forces that determine risk-taking behavior in the field of investing will be explored, forces that include greed, hope, and fear. The class discusses the effect of human reactions on important aspects of market behavior and price movements. Issues include the errors committed by financial practitioners who rely on rules of thumb when making investment decisions or processing information, the effect of investors’ biased reactions to public announcements about securities, and the effect of perceptions of risk and return characteristics of various asset classes on portfolio management and security selection. A comparison of technical and fundamental analysis strategies and their relationship with behavioral finance is also discussed. Cases demonstrating the application of behavioral concepts to finance will be used.

Prerequisite(s): FINC 215