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Module information

Module information for the MSc Behavioural Decision Making in Finance.

Semester 1: compulsory modules

Behavioural Economics I: Concepts and Theories

(BSMP001) 20 Credits

This module provides an overview of theory and concepts in behavioural economics; key areas of intersection between economics and psychology.  Concepts such as Overview of Economics; Rationality; Utility; Choice under uncertainty; Judgment, Biases and Heuristics; intertemporal choice; Affective forecasting; emotion; identity, compliance, social influences feature in this module.  Students will be introduced to core areas of economics and psychology such as judgement, rational choice, intertemporal decision making and emotion-based decision-making.

Corporate Finance

(INVP001) 20 Credits

The module provides an understanding of how corporations raise finance (debt and equity) how they make decisions about investing money (capital budgeting) how they distribute cash to shareholders (dividend policy) and the efficiency of the stock markets in which their shares are traded.

Quantitative Methods in Finance

(BFIP013) 20 Credits

BFIP013 provides students with the statistical and computing skills which are necessary to understand modern finance literature and to operate in a commercial finance environment. The first topic covered will provide a basic understanding of statistical sampling and measurement along with its usefulness and meaning. The remainder of the module will present linear regression analysis as a business tool using the ordinary least squares method. Simple regressions and their statistical properties will be introduced then followed by an expansion to multiple regressions. The violations of the basic assumptions of simple and multiple regression models will be discussed, how these can be detected and tackled and what are the consequences for the estimates. The usefulness of cross-section and time series data will be explored. By the end of the module, students will develop and apply these analytic skills using STATA and they will be able to conduct basic econometric analysis in their master thesis.

Semester 2: compulsory modules

Business and Finance Applications of Behavioural Science

(BSMP008) 10 Credits

The module emphasises recent theories and behavioural intervention toolkits. These include behavioural biases, the use of heuristics in decision making and non-standard preferences of decision makers. The toolkits are increasingly used in government and non-government organizations, converting academic knowledge to practical guidance for business. As part of assessment, students are required to produce a behavioural intervention proposal based on these toolkits.

In this way, the module brings knowledge of behavioural research at the forefront to business and finance applications and clearly demonstrates how behavioural insights can improve on standard approaches.

Evidence-based Decision Making

(BSMP007) 20 Credits

This module applies quantitative methods that will be useful for writing consultancy projects and dissertation.  This module offers a rigorous introduction to causal inference in business and policy evaluation.  This is intended to give students confidence in numerical aspects for their dissertation as well as for their future career in business and policy. Quantitative methods are taught by examples using applications of evaluations conducted in fields such as management, environment, health and labour.  The module is divided in two parts. The first part aims at giving students an overview of experimental methods in evaluation. The second part focuses on the use of secondary data to estimate causal effects and considers principles of cost-benefit analysis and project appraisal. This module is a combination of lectures, workshops and drop-in computer labs.

Behavioural Finance

(FINP006) 10 Credits

This module aims to provide students with knowledge and understanding of the key concepts and issues in Behavioural Finance. The module will provide students with understanding of the theoretical and empirical limitations of the challenges to the efficient market hypothesis, while it will also present the psychological foundations of Behavioural Finance and how they impact upon investors’ rationality and arbitrage. In addition, it will provide the opportunity for students to critically evaluate behaviourally induced market puzzles. Finally, the module will present key behavioural trading patterns from a theoretical perspective and outline their empirical design.

Empirical Methods in Finance and Accounting

(ACCP009) 10 Credits

This module introduces students to advanced empirical methods used in conducting research within applied finance and accounting. It also prepares students for the dissertation module as well as laying the foundations for more advanced postgraduate research.

Semester 2: optional modules

Investments: Equity Portfolio and Pricing

(INVP012) 10 Credits

The module aims to provide an understanding of investments and portfolio management. The module will begin with an overview of the portfolio choice between equities and bonds. The module then examines several portfolio building and equilibrium asset pricing models (e.g., CAPM and the Fama-French models). Subsequently, the module will examine issues in stock return predictability, covering a range of alternative asset pricing models as well as considerations of behavioural finance. These issues are then extended to a wider international context and the costs and benefits of forming internationally diversified portfolios. These principles are then applied to issues of performance measurement within portfolio management.

Investments: Fixed Income and Alternative Investments

(INVP013) 10 Credits

In this module, students will deepen their understanding of fixed income securities and their use and relevance in portfolio management. Students will develop an understanding for yield curves and their relevance in asset pricing as well as being exposed to bond portfolio management techniques such as immunization.

In the second half of the module, students get introduced to so-called ‘alternative investments’, an asset class which encompasses investments into hedge funds and private equity and venture capital funds. These alternative investments will be analysed from the point of view of investors, with particular emphasis on an understanding of the key workings and performance evaluation issues.

International Corporate Finance

(FINP013) 10 Credits

This module provides in-depth study of some of the key areas of finance within an international environment, and in particular, the determinants of foreign exchange rates; the risks associated with international trade and investments and aspects of international portfolio management.

Mergers and Acquisitions

(FINP014) 10 Credits

The module provides an understanding of the motivation for and consequences of mergers and acquisitions against the background of corporate finance theory and practice. Focuses on the financial and economic aspects of M&A activity and other forms of corporate restructuring, such as spin-offs, carve-outs, and sell-offs.

Semester 3

Research Project

(BSMP098) 60 Credits

The project will require students to produce an investment prospectus for an investment product e.g. stock portfolio, pension, savings product etc. The prospectus should make the case that the proposed investment product improves on some current market offering by taking account of behavioural biases. It might, for example, save investors’ money, be easier for investors to understand, gain investors’ money by identifying an arbitrage opportunity, be designed to as to reconcile investors’ behaviour with their plans.

The project will bring together knowledge of behavioural biases and knowledge of investment theory. It will require students to critically consider the applicability of abstract theories to the real world. Developing a novel product will require students to identify developments at the forefront of the financial product market. Students will also be required to communicate their findings in a clear and reader-friendly manner. The prospectus should be aimed to be attractive in the marketplace and so needs to be attractive and informative to the layperson.

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