COMM 375 - Behavioral Finance (formerly COMM 386O)

Behavioral Finance is the study of the ways in which human psychology affects investment practices and financing decisions. Traditionally, theories and models of investment practices have focused on strategies of idealized, rational economic agents. However, as we all know from our daily experience, human decisions are not always ideal or rational. The goal of this course is to (a) give an understanding of the psychological processes that give rise to decision-making biases in investment settings, identify when those biases are most likely to occur, and when they are most likely to be costly (b) provide an overview of the effects of such biases on various market and investment phenomena (c) explore attempts to “bottle” such biases in profitable investment strategies and (d) provide counter-strategies—including elements of classical finance—to minimize the negative effects of psychological biases on financial decisions.

Learning objectives

1. Understand the causes and impact of the behavioral biases that drive and distort investor decision-making
2. Predict how financial market prices and aggregate investor behavior can be influenced by various behavioral biases
3. Evaluate the opportunities that a behavioral finance approach can provide
4. Improve management of risk
5. Increase insight into and control over personal strengths and weaknesses in the context of evaluating financial decisions
6. Improve decision making and reduce behavioral biases in a variety of financial settings. 

Note: This course was formerly numbered COMM 386O. If you've completed the course as COMM 386O, you are not permitted to take it again as COMM 375 (you cannot receive credit for the same course twice).