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University of Exeter Business School

Behavioural Finance

Module titleBehavioural Finance
Module codeBEEM157
Academic year2023/4
Module staff

Dr Pauline Vorjohann (Convenor)

Duration: Term123
Duration: Weeks




Module description

The efficient markets hypothesis has been the central proposition of finance since the 1970s. Since then, disruptive events like the rise and fall of the dot-com bubble and the global financial crisis have shed substantive doubt on this hypothesis. The field of behavioural finance relaxes the assumption of fully rational investors and incorporates insights from psychology to better understand investor behaviour. We will discuss empirical challenges of the efficient markets hypothesis and provide an overview of behavioural theories that set out to explain commonly observed deviations.

Module aims - intentions of the module

The aim of this module is to expand and enrich students’ knowledge of finance from a behavioural perspective. It provides students with the ability to question classical finance models in an informed and well-grounded manner. It does so by first developing a deep understanding of the classical models and their underlying assumptions, moving on to how they are challenged by empirical evidence, and finally showing how theories from behavioural economics can help to predict and understand real-world behaviour within financial markets.

Intended Learning Outcomes (ILOs)

ILO: Module-specific skills

On successfully completing the module you will be able to...

  • 1. Critically evaluate assumptions and hypotheses of classical models of investor behaviour in finance
  • 2. Discuss empirical observations that challenge classical finance theory
  • 3. Explain and critically evaluate behavioural models of investor behaviour and their predictions

ILO: Discipline-specific skills

On successfully completing the module you will be able to...

  • 4. Critically evaluate the underlying assumptions of economic theories and discuss how these assumptions are tested
  • 5. Relate behavioural/psychological insights to classical economic theory

ILO: Personal and key skills

On successfully completing the module you will be able to...

  • 6. Critically evaluate research articles in a systematic and constructive manner
  • 7. Engage in informed and well-reasoned discussion
  • 8. Produce original high quality technical written work

Syllabus plan

  • Efficient markets hypothesis
  • Equity premium puzzle
  • Risk-taking and portfolio evaluation
  • Value investment
  • Volatility of stock prices
  • Noise trading
  • Investor sentiment
  • The limits of arbitrage

Learning activities and teaching methods (given in hours of study time)

Scheduled Learning and Teaching ActivitiesGuided independent studyPlacement / study abroad

Details of learning activities and teaching methods

CategoryHours of study timeDescription
Scheduled learning and teaching activity22Lectures
Scheduled learning and teaching activity5Tutorials
Guided independent study123Problem sets, readings and assignments

Formative assessment

Form of assessmentSize of the assessment (eg length / duration)ILOs assessedFeedback method
Practice exercises1 hour1-8Oral and written

Summative assessment (% of credit)

CourseworkWritten examsPractical exams

Details of summative assessment

Form of assessment% of creditSize of the assessment (eg length / duration)ILOs assessedFeedback method
Assignment40Max. 2000 words1-8Written
Final exam 6090 minutes1-7Written

Details of re-assessment (where required by referral or deferral)

Original form of assessmentForm of re-assessmentILOs re-assessedTimescale for re-assessment
Assignment (40%)Assignment (Max. 2000 words, 40%)1-8Referral/deferral period
Final exam (60%)Exam (90 minutes, 60%)1-7Referral/deferral period

Re-assessment notes

Deferral – if you miss an assessment for certificated reasons judged acceptable by the Mitigation Committee, you will normally be either deferred in the assessment or an extension may be granted. The mark given for a re-assessment taken as a result of deferral will not be capped and will be treated as it would be if it were your first attempt at the assessment.

Referral – if you have failed the module overall (i.e., a final overall module mark of less than 50%) you will be required to redo the assessment(s) as necessary. If you are successful on referral, your overall module mark will be capped at 50%.

Indicative learning resources - Basic reading

Basic reading: 

  • Ackert, L. F. and Deaves, R. 2010, Behavioral Finance – Psychology, Decision-Making, and Markets, South-Western, Cengage Learning
  • Thaler, R. H. 2005, Advances in Behavioral Finance Vol. II, Russell Sage Foundation and Princeton University Press
  • Shleifer, A. 2000. Inefficient Markets – An Introduction to Behavioural Finance, Oxford University Press
  • Hirshleifer, D. 2015, Behavioral finance. Annual Review of Financial Economics7, 133-159

Indicative learning resources - Web based and electronic resources

Web-based and electronic resources: 

  • ELE – College to provide hyperlink to appropriate pages


Indicative learning resources - Other resources

Other resources:

  • Thaler, R. H. 2015, Misbehaving – The Making of Behavioural Economics, Penguin Random House

Key words search

Behavioural Finance, Bounded Rationality, Behavioural Economics

Credit value15
Module ECTS


Module pre-requisites


Module co-requisites


NQF level (module)


Available as distance learning?


Origin date


Last revision date