MSc Behavioural Finance Elective
The Course will be assessed through group coursework.  Groups should consist of 4 or 5 members. You will be required to allocate yourself to a group on Cityspace.
Groups are required to write a group project on one of the following topics (maximum word count 5,000 words).  Please note that your essays will be enhanced by reference to theory AND practical real-world examples:
Behavioural Finance:
1.“Stock markets are efficient. Therefore, investors should simply follow a
passive strategy of investing in the ‘market’ portfolio. Active fund
management is wasteful and earns inferior returns!”  Discuss this statement,
with particular reference to behavioural theories.
2.Discuss the influence of heuristics, psychological biases and emotions on
reference group
investor behaviour.  Are heuristics always inefficient?
3.Discuss the effect of overconfidence on investors’ decision-making.
Behavioural Corporate Finance:
1.Discuss the behavioural factors that may lead corporate managers to become
entrapped into losing projects.
2.“Managerial Overconfidence is bad for shareholders, and should therefore be
eliminated.”  Critically appraise this statement.
3.Critically appraise the behavioural factors that may affect corporate dividend
policy.
4.Discuss the importance of fairness, trust and reciprocity in the financial
markets/corporate finance, with reference to relevant theories and
practical examples.
Emotional Finance/emotional corporate finance:
1.“As a result of investors’ unconscious emotions, stock market behaviour is
predictable.”  Critically appraise this statement.
2.According to emotional corporate finance, how might managers’ unconscious
emotions affect their decisions surrounding project investment?
Deadline: Friday 24th June 2011 at 6pm
Richard Fairchild May 18th 2011.

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