Behavioural finance theory

Assessment Information

 

This assignment is designed to assess learning outcomes:

Apply behavioural finance theory in the provision of investment advice

(ILO – 3)

Appraise the implications of research on behavioural finance and market

efficiency for security pricing and financial analysis (ILO – 4)

 

This assignment is a GROUP (with Individual component) assignment.

 

This assignment requires you to prepare a group report by using relevant theories of

Behavioural Finance provide a critical review of the following:

 

Group:

  Critically explain the underlying causes of disposition effect (i.e. the propensity

towards selling the winners and keeping theloses) and its relevant implications

regarding financial decision making. (Weighting 70%)

 

Individual:

  How behavioural inefficiency can be linked to the so-called pricing anomalies

currently reported in finance literature. (Weighting 30%)

 

Criteria for Assessment

Your assignment should cover in depth the following:

 

Group Theory and Literature (Weighting 70%)

 

1What is disposition effect (nature), how it is caused (mechanics) and how

that contradicts exiting financial decision- making. (Weighting 20%)

 

2)
What are the main causes of disposition effect? (Weighting 30%)

 

3Explain how and to what extent this bias could be used in the

determination of stock price movement and its relevant implications

regarding financial decision making. (Weighting 50%) (500 words)

 

Individual500 words Literature Review and Practical Implication (Weighting 30%)

Summarise  the  current  empirical  evidence  of  behavioural

explanation/theories regarding stock market anomalies. This part

requires you to summarise the existing academic literature (academic

papers) that provide behavioural explanations and their implications for

real-life investment activity (Weighting 100%)

 

 

The aim of the assignment is for you to show that you have a good understanding of the

relevant behavioural finance theory and existing research of its validity in real life

investment management. The grade you achieve for this part will depend entirely on

the level of understanding demonstrated in your assignment and your sound empirical

backing. In terms of referencing, you are required to use CU version of the Harvard

Referencing System of Citation. Also, beware of the academic regulations regarding

plagiarism (see page 3).

#Behavioural #finance #theory

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