Behavioural Finance An Investment Decision

“Behavioural Finance: An Investment Decision” explores the intersection of psychology and finance, challenging traditional notions of rational decision-making in financial markets. It delves into cognitive biases, heuristics, and emotions that influence investment choices, uncovering how these factors contribute to market anomalies. The book introduces Behavioural Portfolio Theory and examines its implications for advisers and clients, as well as its impact on corporate finance and public policy. It aims to equip readers—from students to professionals—with insights into human behaviour’s pivotal role in financial outcomes, offering a forward-looking perspective on emerging trends and the future of this dynamic field.

Contents –

1. Introduction to Behavioural Finance
1.1 Overview of Behavioural Finance
1.2 Limitations of Traditional Finance Theories
1.3 The Emergence of Behavioural Finance
1.4 Importance of Understanding Investor Psychology
1.5 The Role of Emotions in Investment Decisions
1.6 Case Study with Assignments
1.7 Key Terms
1.8 Summary
1.9 Questions
1.10 Projects
1.11 References

2. Cognitive Biases in Investment Decision-making
2.1 Introduction
2.2 Some Important Points to Consider When Discussing Congnitive Biases in Investment Decision-making
2.3 Exploring Extraordinary Dimensions of Investment Biases
2.4 Anchoring Bias
2.5 Availability Bias
2.6 Confirmation Bias
2.7 Overconfidence Bias
2.8 Framing Effect
2.9 Case Study with Assignments
2.10 Key Terms Key Terms
2.11 Summary
2.12 Questions
2.13 Projects
2.14 References

3. Heuristics and Their Impact on Investment Decisions
3.1 Introduction
3.2 Types of Heruistics Commonly Observed in Investment Decision-making
3.3 Representativeness Heuristics
3.4 Gambler’s Fallacy
3.5 Mental Accounting
3.6 Herding Behaviour
3.7 Case Study with Assignments
3.8 Key Terms
3.9 Summary
3.10 Questions
3.11 Projects
3.12 References

4. Emotions and Their Role in Investment Decisions
4.1 Introduction
4.2 Fear and Greed
4.3 Loss Aversion
4.4 Regret Aversion
4.5 Disposition Effect
4.6 Case Study with Assignments
4.7 Key Terms
4.8 Summary
4.9 Questions
4.10 Projects
4.11 References

5. Behavioural Portfolio Theory
5.1 Introduction
5.2 Mean-variance optimization
5.3 Behavioural Portfolio Theory
5.4 Prospect Theory
5.5 Aspiration Level Theory
5.6 Case Study with Assignments
5.7 Key Terms
5.8 Summary
5.9 Questions
5.10 Projects
5.11 References

6. Behavioural Finance and Market Anomolies
6.1 Introduction
6.2 Calendar Effects
6.3 Momentum and Reversal Strategies
6.4 Overreaction and Under Reaction
6.5 Behavioural Explanations for Market Anomalies
6.6 Case Study with Assignments
6.7 Key Terms
6.8 Summary
6.9 Questions
6.10 Projects
6.11 References

7. Behavioural Finance and Financial Advisor-Client Relationship
7.1 Introduction
7.2 Behavioural Biases in Financial Advice
7.3 Improving Financial Advice, Through Behavioural Insights
7.4 Nudging Clients Towards Better Financial Decisions
7.5 Case Study with Assignments
7.6 Key Terms
7.7 Summary
7.8 Questions
7.9 Projects
7.10 References

8. Behavioural Finance and Corporate Finance
8.1 Introduction
8.2 Behavioural Biases in Corporate Decision-making
8.3 Behavioural Corporate Finance
8.4 Mergers and Acquisitions from a Behavioural Perspective
8.5 Case Study with Assignments
8.6 Key Terms
8.7 Summary
8.8 Questions
8.9 Projects
8.10 References

9. Behavioural Finance and Public Policy
9.1 Introduction
9.2 Behavioural Insights and Public Policy
9.3 Nudging Individuals Towards Better Financial Decisions
9.4 Behavioural Finance and Financial Regulation
9.5 Case Study with Assignments
9.6 Key Terms
9.7 Summary
9.8 Questions
9.9 Projects
9.10 References

10. Future Directions
10.1 Introduction
10.2 Summary of Key Concepts
10.3 Emerging Trends in Behavioural Finance
10.4 Implications for Investors, Advisors and Policymakers
10.5 Advisors and Policymakers
10.6 Impact of Artificial Intelligence (AI) in Behavioural Finance
10.7 AI and Behavioural Finance Biases
10.8 Case Study with Assignments
10.9 Key Terms
10.10 Summary
10.11 Questions
10.12 Projects
10.13 References