Course Details in 2024/25 Session

Module Title	LM Behavioural Economics and Finance
School	Birmingham Business School
Department	Economics
Module Code	07 40056
Module Lead	Paola Paiardini
Level	Masters Level
Credits	20
Semester	Semester 2
Pre-requisites
Co-requisites
Restrictions	None
Exclusions
Description	This module has two parts: the economics part of the module introduces the field of behavioural economics and focuses on the decision-making processes, both as individual and in groups. We will focus on some of the inherent biases in our decision processes and challenge the assumption of rationality in decision making including but not limited to, present bias, representativeness, availability, halo effect, regression to the mean. This part will provide several examples of behavioural biases which reflect that we can be \"predictably irrational\" in our decision-making processes. The finance part of the module studies how individuals and firms make financial decisions and how decisions might deviate from those predicted by traditional finance and economic theory. It focuses on decision-making biases, best understood in models with not fully rational agents. With Prospect Theory, students can explain many empirical phenomena considered as 'anomalies' by traditional finance. Topics may include herding behaviour, investors' overreaction and under-reaction, mental accounting, overconfidence, the dividend and the equity premium puzzles.
Learning Outcomes	By the end of the module students should be able to: Demonstrate understanding of how individuals actually make financial decisions within the framework of human psychology. Identify empirical evidence of market anomalies and understand the drivers of these anomalies. Compare methods to improve financial decision making, e.g. ethical financial decisions. Critically evaluate the major implications of human psychology for financial decision-makers and financial markets. Develop critical thinking, decision-making, policy-making and leadership skills for financial economics graduates.
Assessment
Assessment Methods & Exceptions	Assessment: (1750 word) individual assignment (essay) (50%). (1750 word equivalent) preparing an individual policy paper on a contemporary module issue (50%). Reassessment: Resubmit failed component: (1750 word equivalent) individual assignment (essay) (50%). (1750 word equivalent) preparing an individual policy paper on a contemporary module issue (50%).
Other
Reading List