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370086: Behavioral Finance
MGMT-X 430.137

  • Fall 2019
  • Section 1
  • 4 Credits
  • 09/25/2019 to 12/04/2019
  • Modified 09/24/2019

Description


This course is based on the fundamental principle that the first step to successfully investing your money is to not lose it. Covering the theory and practice of behavioral finance, including a history of financial bubbles, scams, and a study of the heuristics (rules of thumb) and biases that drive human behavior. Other topics in this course include prospect theory, common investment mistakes, the role of randomness in finance, retirement planning, and practical applications of behavioral finance. Also presented are basic principles of traditional portfolio theory and behavioral finance research that suggests there are persistent market traits that can generate excess returns.

Outcomes


By the end of this course, a successful learner should be able to:

  1. Understand cognitive limitations we all have as human beings and sources of these limitations.
  2. How to deal with cognitive limitations. Learn and understand heuristics and biases that can cause irrational financial decisions
  3. Impact of these limitations in the finance field – personal finance, corporate finance and capital markets.
  4. Examine the validity of the Efficient Market Theory.
  5. Make better investment decisions

Materials


Thinking Fast and Slow

  • Author: Daniel Kahneman
  • Publisher: Ferrar, Straus and Giroux
  • Edition: 1st Edition
  • ISBN: 978-0-374-27563-1

Evaluation


Criteria

Grades are assigned based on points. All work will be graded within seven days of thedue date. Explanations about discussion questions, assignments, and other course components appear in the appropriate weekly pages.

Types of evaluations and related weights
Type Weight Topic Notes
Discussion and Interaction 20 points
Tests/Quizzes/Summaries 40 points

All tests are open book

Papers/Projects 40 points
All course components 100 points

Breakdown

Discussion Rubric:
This rubric will be used to assess the quality of your initial responses and interaction in the online discussion forums. Please use this tool as a guide when constructing your postings.

  Unsatisfactory Basic Proficient Distinguished

Mechanics of

the Posting

Uses incomplete sentences, is unstructured in its organization, and includes frequent or consistent errors in mechanics (grammar, spelling, usage) in each paragraph. The posting is unreadable and there is a distinct lack of tone. Uses complete sentences and the posting is comprehensible. The organization could be improved to present a more coherent argument, statement, or question. Includes 2-3 mechanical errors grammar, spelling, usage) per paragraph. The tone is respectful. Uses complete sentences, organization is evident, and the posting includes no more than one mechanical error (grammar, spelling, usage) per paragraph. The tone is clear and respectful Uses complete sentences, organization is clear and thoughtful, the posting is grammatically correct, and free of spelling errors. The tone is clear and respectful.

Participation in

the Discussion

Provides minimal comments and information to other participants in the forum. Provides comments, and some new information on a sporadic basis. Interacts with only 2 participants in the forum. Provides comments, discussion, questions, and new information on a fairly regular basis. Interacts with three or more participants in the forum. Provides comments, discussion, questions, and new information on a regular, active, and weekly basis. Shows a high degree of interaction with five or more participants in the forum.

Content

of Posting

Writes a general or superficial posting that is unrelated to the discussion at hand and/or posts no comments. Demonstrates a restricted understanding of the concepts, topics, and ideas as evidenced by posting information that could be derived from prior posts and/or including highly general comments. Demonstrates an adequate understanding of the concepts, topics, and ideas as evidenced by posting superficial, or general statements in the forum. Includes a few details in the posting. Demonstrates a solid understanding of the concepts, topics, and ideas as evidenced by thoughtful responses and questions that show a clear connection (are integrated) with the course material at hand. The posting shows depth, and includes many supporting details.

Critical Thinking 

Evidenced by

Posting

Provides no evidence of agreement or disagreement with an existing discussion. Indicates agreement or disagreement with an existing discussion but provides no justification or explanation for comments. Indicates agreement or disagreement with an existing discussion including a limited explanation or justification. Provides comments, discussion, and questions without a clear connection to the course material at hand. Demonstrates a critical analysis of an existing posted idea or introduces a different interpretation to an existing concept or idea. Includes comments, discussion, and questions that have a clear connection (are integrated) with the course material at hand.
A+
100 %
to 97.0%
A
< 97.0 %
to 94.0%
A-
< 94.0 %
to 90.0%
B+
< 90.0 %
to 87.0%
B
< 87.0 %
to 84.0%
B-
< 84.0 %
to 80.0%
C+
< 80.0 %
to 77.0%
C
< 77.0 %
to 74.0%
C-
< 74.0 %
to 70.0%
F
< 70.0 %
to 0.0%

Course Policies


Instructor Expectations

Welcome! I'm looking forward to working with you, learning about what you're doing and how you plan to use the course in your career. Adult learners generally appreciate it when their online facilitator is clear and direct with them about expectations for course requirements and procedures.

Here are a few expectations I would like you to know about as we begin this course. Simply be yourself. We bring different kinds of experiences to online. Each of you will have different needs, expectations, concerns, and agendas. As your facilitator, it will be easier to help meet your needs if you communicate them directly and sincerely. I am very learner centered. I hope you'll always find that I am responsive and supportive.

Course Format: Online

This course is designed to be completed entirely online. All course activities and assignments will be managed through Canvas – you will use your unique username and password to log into the course, interact with your instructor and fellow students, and submit any required assignments.

Since attendance is asynchronous (not in real time), you may login at any time of the day. However, you are expected to participate in the virtual classroom on a weekly basis and complete all readings, discussion requirements and assignments/exams as required (see Course Policies below for more information).

Please keep a copy of all assignments and work submitted. Print the syllabus for your reference. It is your responsibility to be aware of all assignments, due dates and guidelines.

Note the following points about online courses at UCLA Extension: 

  • Students must have basic computer skills, including the use of word processing software, email, and the ability to use internet browsers such as Firefox, Safari, or Chrome.
  • Students should familiarize themselves with Canvas and are responsible for meeting the minimum technical requirements for using Canvas.
  • Course materials will become available two days before the beginning date of the course.
  • Students must follow all posted deadlines and must complete all work in Canvas by the end of the course. Students receiving an “Incomplete” may not complete work within Canvas and must work individually with their instructor to satisfy completion requirements.

Planning Your Study Time

To plan your study time, it is estimated that you will spend 3 hours per week "in class" with the instructor and approximately 7 additional hours per week outside of class studying for exams, reading, and completing assignments. Depending on the extent of your academic preparation and recent college-level coursework in this topic area, the amount of study time needed may vary considerably.

Posting Responses:

I hope that you will make the commitment to post your responses for exercises, assignments and discussions on the due dates each week. The classroom should be active all week -- not just on weekends. Pacing your work earlier in the week will give you more time for larger projects when you need it. Your postings should incorporate responses to your peers, your opinions, pertinent information from things that you’ve read, and examples from your experience. Your responses should include more than phrases such as "I agree with that" or "Interesting comment." The distinguishing feature of a well done posting might include an objective and critical analysis of what you read, how it applies to your experience; or, how you might use that information in the future.

Your posts should be substantive and feature good writing, correct spelling and mechanics. We judge one another substantially by the quality, clarity and depth of our writing. Communication should be professional and use good netiquette. In the spirit of scholarly discussion, I am not opposed to responses that disagree with a position taken by others as long as the response is respectful. In our learning model, the heart of active learning occurs through the discussions that help you test your ideas, reinforce what you have learned, and share resources with others in the class. Successful students check the course room and interact with others as required by assignments which usually means checking-ins and responding four to five days each week.

Responses to your Postings:

I will be in the classroom at least five days a week, sometimes every day. I will respond to questions within 24 hours. All work will be graded within seven days of the original due date.

Put my name in postings to Victor Dosti. Do the same for responses to everyone else. No messages are private - so please expand on any topic.

Confused?

If, after reading an assignment, you do not understand what to do, please start by asking questions in the Questions about the Course Discussion Board Forum. If you are confused, it is likely that other students are also confused. This not only allows me to clarify the issue for everyone, but it also allows other students to answer the question if they happen to be in the course before I am. This is much better than turning in an assignment that is not done correctly and losing points. For technical problems, please contact technical support. For personal issues, feel free to contact me my email or for complex issues, by phone.

Thank you for your thoughtful reading of the expectations; I welcome your comments. Have a great learning experience!

Policies About Deadlines and Late Work

Life happens and I understand that work and family emergencies occur. If your work is posted late but during the week that it is due, you’ll receive full points. If the work from one week is posted late during the next week, you’ll lose ten percent for each day that it is late. If you contact me before the assignment is late, we can try to work out something for your schedule. However, there are no extensions for the class. All work must be turned in by the last day of class.

Institutional Policies


Student Conduct

Students are subject to disciplinary action for several types of misconduct or attempted misconduct, including but not limited to dishonesty, such as cheating, multiple submission, plagiarism, or knowingly furnishing false information to the University; or theft or misuse of the intellectual property of others or violation of others' copyrights. Students are encouraged to familiarize themselves with policy provisions which proscribe these and other forms of misconduct at: https://www.uclaextension.edu/pages/str/studentConduct.jsp

Services for Students with Disabilities

In accordance with the Americans with Disabilities Act of 1990, UCLA Extension provides appropriate accommodations and support services to qualified applicants and students with disabilities. These include, but are not limited to, auxiliary aids/services such as sign language interpreters, assistive listening devices for hearing-impaired individuals, extended time for and proctoring of exams, and registration assistance. Accommodations and types of support services vary and are specifically designed to meet the disability-related needs of each student based on current, verifiable medical documentation. Arrangements for auxiliary aids/services are available only through UCLA Extension’s Service for Students with Disabilities Office at (310) 825-7851 or by email at [email protected]. For complete information see: https://www.uclaextension.edu/pages/str/studentswithDisabilities.jsp

Incompletes

Your instructor may post the interim grade Incomplete/I if at the end of the class your overall work is of passing quality but a portion could not be submitted for understandable reasons (e.g. illness). It is your responsibility to petition your instructor for permission to submit work late and to provide an explanation, and it is his or her sole decision whether to accept the explanation. If permitted, the Incomplete/I grade will be posted and a time frame defined for you to submit the missing work, ranging from one to twelve weeks. Incomplete/I grades that remain unchanged after twelve weeks will lapse to F, NP or U. Receiving an I grade entitles you to submit only the missing work your instructor has agreed to accept late, and does not allow other work to be retaken or oblige UCLA Extension to provide continuing access to course materials via Canvas. The Incomplete/I grade is not an option for courses that do not bear credit, such as 700, 800, or 900-level courses. For complete information, see: https://www.uclaextension.edu/pages/str/grading.jsp

All Grades are Final

No change of grade may be made by anyone other than the instructor, and then, only to correct clerical errors. No term grade except Incomplete may be revised by re-examination. The correction of a clerical error may be authorized only by the instructor of record communicating directly with personnel of Student and Alumni Services.

Sexual Harassment

The University of California is committed to creating and maintaining a community where all individuals who participate in University programs and activities can work and learn together in an atmosphere free of harassment, exploitation, or intimidation. Every member of the community should be aware that the University prohibits sexual harassment and sexual violence, and that such behavior violates both law and University policy. The University will respond promptly and effectively to reports of sexual harassment and sexual violence, and will take appropriate action to prevent, to correct, and when necessary, to discipline behavior that violates our policy.

All Extension students and instructors who believe they have been sexually harassed are encouraged to contact the Department of Student and Alumni Services for complaint resolution: UCLA Extension, Suite 113, 10995 Le Conte Ave., Westwood; Voice/TTY: (310) 825-7031. View the University’s full Policy on Sexual Harassment and Sexual Violence at http://policy.ucop.edu/doc/4000385/SHSV.

Additional Items


Course and Instructor Evaluation

UCLA Extension values your feedback on course and instructor evaluations. We ask all students to take a few minutes to complete an end-of-course evaluation survey. Updates to the course and instruction are influenced by your feedback. Understanding your student experience is essential to ensure continuing excellence in the online classroom and is appreciated by your instructor and the UCLA Extension academic leadership.

Your participation in a survey is voluntary, and your responses are confidential. After instructors submit grades, they will be given an evaluation report, but this report will not contain your name.

About Your Online Course Materials

Please note the following about online course components at UCLA Extension:

  • Students must have basic computer skills, including the use of word processing software, email, and the ability to use internet browsers, such as Safari, Firefox, or Chrome.
  • Students are responsible for meeting the technical requirements of Canvas and familiarizing themselves with the Canvas Learning Management System.
  • Students are responsible for keeping a copy of all assignments and work submitted, and to be aware of all assignments, due dates, and course guidelines.
  • Students are encouraged to keep and/or download a local copy of their assignment files, as access to the online environment of a specific course is limited to 30 days after the final course date, as listed in the course catalog.

    If you need assistance downloading student materials from your course, please contact Canvas Support or the UCLA Extension Learning Support Team.

UCLA Extension Canvas and Learning Support

For immediate 24/7 Canvas technical support, including holidays, click on Help (located on the menu to the left) where you can call or chat live with a Canvas Support representative.

UCLA Extension Instructional Design and Learning Support
The UCLA Extension Learning Support staff assists both students and instructors with Canvas-related technical support, as well as general and administrative questions.

Learning Support staff is available Monday through Friday, from 8 AM to 5 PM (Pacific Time), except holidays:

Schedule


Course calendar and related activities
When Topic Notes
Week # 1
Two Systems

Two Systems

- Intelligence, Control, Rationality

- The Associative Machine

- Cognitive Ease

 

Reading: 

Thinking Fast and Slow

Chapters 1 - 6

 

Video - Richard Thaler: "The Behavioralizing of Economics"  

Week # 2
Norms, Surprises and Judgement

-Norms, Surprises and Causes

-How Judgments Happens

- Answering and Easier Question

 

Reading:

Thinking Fast and Slow

Chapters 7 - 10

 

Optional Reading

Behavioral Finance Theory and Practical Applications  by Hubert Fromlet

Video - Behavioral Economics: Past, Present and Future

Assignment:

Write a short paragraph summarizing functions of system one and system two

(5 points) 

 

Week # 3
Heuristics and Biases

Heuristics and Biases

 -  Anchors

 

Reading:

Thinking Fast and Slow

Chapters 11 - 17

 

Optional Reading

Interview with Richard Thaler.

http://www.newyorker.com/online/blogs/johncassidy/2010/01/interview-with-richard-thaler.html?printable=true¤tPage=all

 

Using Behavioral Finance to Better Understand the Psychology of Investors

http://www.institutionalinvestor.com/article.aspx?articleID=2485942

 

Video - Robert Shiller Behavioral Finance and the Role of Psychology

Week # 4
Regression to the Mean

Regression to the Mean

 

Reading:

Thinking Fast and Slow

Chapter 17-18

 

Optional Reading

Can Market Add and  Subtract

Overreaction and Underreaction

http://overreaction-and-underreaction.behaviouralfinance.net

 

Assignment:

Short Quiz (10 Points)   

 

 

Week # 5
Overconfidence

Overconfidence

 -The Illusion of Understanding

 

Reading:

Thinking Fast and Slow

Chapter 19 - 20

 

Optional Reading

 Video - Nicholas Barberis - Psychology and Financial Crisis of 2007 - 2099

http://www.youtube.com/watch?v=gh_EbIPcnSk

 

Style Investing

 

Assignment:

Write a short summary with your thoughts about “The

Psychology of the Financial Crisis of

20087-2009

(15 points)

 

Week # 6
Intuition

Intuition

 

Reading:

Thinking Fast and Slow

Chapters 21 - 24

 

Optional Reading

Investors Sentiment

Investors Sentiment - Summary

 

Video - Richard Thaler: Here's the best investing strategy

Week # 7
Choices

Choices

- Prospect Theory

- Bernoulli’s Errors

 

Reading:

Thinking Fast and Slow

Chapters 25 - 26

 

Optional Reading

Theory and Notes

Efficiency and Beyond

http://www.economist.com/node/14030296?story_id=14030296

 

Video - Richard Thaler Interview: the less attention you pay, the more money you’ll have

 

Assignment:

Short Quiz (10 Points)

 

Week # 8
The Endowment Effect

- The Endowment Effect

- Bad and Rare Events

 

Reading:

Thinking Fast and Slow

Chapters 27 - 30

 

Optional Reading

Good News for Value Stocks

Fama 1998 – Behavioral Finance

Video - Are markets efficient? Interview with Fama

Advisors Perspective

http://advisorperspectives.com/pdfs/newsltr08-2-5-1.pdf

Week # 9
Risk Policies

- Risk Policies

- Reversals

 

Reading:

Thinking Fast and Slow

Chapters 31 - 34

 

 

week # 10
Behavioral Finance and Practical Applications

Behavioral Finance and Practical Applications

- Frames and Reality

- Thinking About Life

 

Reading:

Thinking Fast and Slow

Chapters 35 - 38

 

Assignment:

Final Paper