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Introduction to Behavioral Finance

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Course DatesLengthMeeting TimesStatusFormatInstructor(s)CRN
July 19, 2021 - August 18, 20217/19 - 8/184 WeeksOnlineOpenOnlineMarcin Pietrzak
11621

Course Description

Have you ever made a regrettable purchase and then found yourself rationalizing your decision? Have you witnessed family members spending money in ways that don’t seem to be in their best financial interest? Behavioral finance combines behavioral and cognitive psychological theory with traditional economics to provide explanations for why people make irrational financial decisions.

The main goal of the course is to provide students with a broad idea of the ways in which cognitive errors such as psychological bias, influence our financial decisions. We will compare how the decisions prescribed by behavioral finance differ from the decisions implied by traditional finance. In the first part of the course, we will focus on traditional economic theory and show that it cannot account for different anomalies and paradoxes in financial decision-making. Next, we will turn to psychology as the missing link that explains the discrepancies between traditional finance and actual human behavior. We will focus on the biases and common mistakes that have been documented in the behavioral literature and what they imply. After gaining a foundational understanding of behavioral finance, we will turn to its applications – investment decisions, financial markets manias, managerial mistakes, the role of uncertainty and risk and stock market puzzles.

As a result of this course students will be able to identify and apply the concepts of behavioral finance to their own lives and to contemporary events. In particular, they will be able to enhance their decision-making by reducing bias in their financial decision-making. This course will be of particular interest to students interested in pursuing a major or career in economics and finance.

Prerequisites: No prior knowledge of finance or economics is required. However, basic knowledge of algebra is expected, as well as the ability to engage in college-level reading.

Course Information

  • Course Code: CEEC0936

Program Information

Summer@Brown

Brown’s Pre-College Program in the liberal arts and sciences for students completing grades 9-12 by June 2021.

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