Behavioural Choice and Financial Decision Making
Over the last thirty years, a wealth of empirical data has been accumulated which questions the ability of the rational choice model to predict behaviour, either in stylised laboratory settings, or in financial decisions taken by consumers in the real world. The purpose of this course is to introduce students to alternative models of choice, and to demonstrate the state of the art in terms of behavioural models of individual choice, with an emphasis on applications to financial decision-making.
Knowledge of behavioural economics is not specific to any one country or culture.
All of the resources for this module are available on the ELE (Exeter learning Environment).
This module equips students with logical thinking, numeracy and writing skills, as well as an understanding and theoretical knowledge of economic issues. These help students think like economists, a quality highly valued by employers.
Full module specification
|Module title:||Behavioural Choice and Financial Decision Making|
|Duration of module:||
Duration (weeks) - term 2: |
The aim of this module is to enable students to examine choice theory from a behavioural perspective, and highlight
instances where the rational choice model predicts actual choices correctly and instances where it does not. Students will be introduced to known anomalies in choice behaviour relative to the rational choice model, and subsequent behavioural
theories which explain those anomalies. A specific emphasis will be placed on financial markets and financial decision-making.
ILO: Module-specific skills
- 1. synthesise and critically evaluate models of rational choice
- 2. synthesise and critically evaluate with behavioural models which rationalize patterns of behaviour which are anomalous to the rational choice model
- 3. synthesise applications of such models to finance
ILO: Discipline-specific skills
- 4. synthesise the difference between normative and positive theories of behaviour
- 5. critically evaluate how economic theories are developed and tested
- 6. synthesise and critically evaluate how new theories are developed to account for new empirical evidence
ILO: Personal and key skills
- 7. produce high quality work (whether in a group or individually) in written form
- 8. engage in independent study
- 9. research and summarise a body of literature in order to produce a report
- 10. engage in critical thought and reasoned discussion
Learning activities and teaching methods (given in hours of study time)
|Scheduled Learning and Teaching Activities||Guided independent study||Placement / study abroad|
Details of learning activities and teaching methods
|Category||Hours of study time||Description|
|Scheduled Learning and Teaching||22||Lectures/Seminars|
Summative assessment (% of credit)
|Coursework||Written exams||Practical exams|
Details of summative assessment
|Form of assessment||% of credit||Size of the assessment (eg length / duration)||ILOs assessed||Feedback method|
|Paper presentation||30||30 minutes||1-7||Written/verbal|
|Assignment presentation||70||30 minute presentation.||1-7||Written/verbal|
Details of re-assessment (where required by referral or deferral)
|Original form of assessment||Form of re-assessment||ILOs re-assessed||Timescale for re-assessment|
|Presentation and Assignment||Assignment (4000 words)||1-7||July|
- Bounded rationality
- Behavioural models of choice under risk and uncertainty
- Behavioural models of intertemporal choice
- Behaviour in financial markets
Indicative learning resources - Basic reading
This class will be based mainly on research papers which will be posted on the course’s ELE page or available through the library webpage.
The following books also provide a good background to the material discussed in class:
- Shleifer, A. 2000. Inefficient Markets – An Introduction to Behavioural Finance, Oxford University Press. Shefrin, H. 2007. Behavioural Corporate Finance, McGraw-Hill.
- Shefrin, H. 2007. Behavioural Corporate Finance, McGraw-Hill.
- Thaler, R.H. 1991 Quasi Rational Economics, Russell Sage Foundation. Goldberg, J. and von Nitsch, R. 1999. Behavioural Finance, FinanzBuch Verlag. Shiller, R.J. 2000. Irrational Exuberance Princeton University Press.
- Kahneman, D., Slovic, P. and Tversky, A. 1982. Judgement Under Uncertainty: Heuristics and Biases, Cambridge University Press.
Module has an active ELE page?
Last revision date