MSc Behavioural Finance Detailed Module Information

MSc Behavioural Finance detailed moduleinformationExample timetablePlease note that information regarding modules is subject to change.TERM 1TERM 2TERM 3INDUCTION WEEKEXAM PERIODWeek 1EXAM PERIODWeeks 1 - 3ASSET PRICINGJUDGEMENT ANDDECISION MAKINGDISSERTATIONFOUNDATIONS OF CORPORATEFINANCEBEHAVIOURAL FINANCEECONOMICS OF FINANCIALMARKETSELECTIVEQUANTITATIVE METHODS FORFINANCEELECTIVECORE MODULES – Term 1Asset PricingGain an introduction to financial markets and techniques for valuation of risky assets. The skills acquired will be usedin other modules and are essential for a financial economist.Topics covered include:Financial markets and instruments; choice under uncertainty and risk measurement; state preference theory; meanvariance portfolio theory; equilibrium in capital markets; testing CAPM and APT; CAPM variants; APT andConsumption CAPM; efficient capital markets; introduction to derivatives; portfolio performance evaluation.

Assessment consists of a series of online tests during Term 1 worth 20% of the final mark and a two-hourexamination in Term 2 (January) equivalent to 80%.Foundations of Corporate FinanceUndertake in-depth analysis of the key determinants of the investment and financing decisions of the firm.Topics covered include:Capital budgeting; capital structure; dividend policy; mergers and takeovers.Assessment consists of a module test in Week 11 of Term 1 worth 20% of the final mark, and a two-hourexamination in the first week of Term 2 (January) equivalent to 80%.Economics of Financial MarketsLearn the basic tools of economic analysis, and gain an understanding of policy issues relevant to financial marketsand the economic context within which they operate. Study the basic tools of microeconomic analysis and modernmacroeconomic theory.Topics covered include:Consumption and production theory and general equilibrium; strategic interaction; asymmetric information andagency problems; The ISLM model; monetary and fiscal policy; credibility and the role of expectations; The YieldCurve and the stock market; Dynamic ISLM.Assessment consists of a module test in Week 11 of Term 1 worth 20% of the final mark and a two-hour examinationin the first week of Term 2 (January) equivalent to 80%.Quantitative Methods for FinanceExplore the basic tools for quantitative analysis of the financial markets and learn the quantitative skills you willneed for other modules such as, for instance, Asset Pricing and most importantly, Empirical Finance. The first twolectures of the module are an introduction to statistics. The remaining lectures cover the material corresponding to asound introduction to econometrics.Topics covered include:Statistics: sampling, sampling distributions, point estimation, confidence intervals, hypothesis testing; linearregression model, estimation and inference; departures from the classical linear model assumptions:multicollinearity, heteroscedasticity, autocorrelation; model specification and diagnostic testing; introduction to timeseries econometrics. ARMA models; trends and cointegration analysis.Assessment consists of a module test in Week 11 of Term 1 worth 20% of the final mark and a two-hour examinationin the first week of Term 2 (January) equivalent to 80%.CORE MODULES – Term 2Judgement and Decision MakingGain an introduction to the psychology of human judgement and decision making. This field provides the foundationfor understanding the decision-making processes involved in financial markets. Explore how the insights from thiswork can help you understand the origins of rational and irrationality in financial decision makers and financialmarkets; help improve your own financial decision-making, judgements and predictions; and provide a broaderunderstanding of decision-making throughout the finance industry, including strategic and managerial decisionmaking.Topics covered include:The nature of rationality; theoretical perspective on human judgement; the psychology of value and utility; decisionmaking under certainty; decision making under risk; judgement; confidence and expertise; decision making inmarkets, groups and society.

Assessment will be by means of a 3,000 word essay worth 80% of the final mark and a group seminar presentationfor the remaining 20%.Behavioural FinancePsychologists working in the area of behavioural decision-making have produced much evidence against theadequacy of neoclassical economics. Behavioural finance comprises financial analysis which relaxes some of theseassumptions. It is a paradigm where financial markets are studied using models that are less narrow than thosebased on von Neumann-Morgenstern expected utility theory and arbitrage assumptions.Topics covered include:Market Efficiency; Prospect theory; Loss aversion; the impact of Knightian uncertainty; limits to arbitrage;overconfidence in financial markets; herding and asset bubbles; paradoxes and anomalies; the disposition effect;investor sentiments.Assessment consists of a two-hour examination in Term 3 (April/May) equivalent to 70% of the final mark andcoursework worth 30%.ELECTIVE MODULES – TERM 2Students are required to choose TWO elective modules from those listed below. This is an indicative list only;further information and confirmation of the available electives will be provided at the end of Term 1.Advanced Corporate FinanceExplore the basic issues in mergers and acquisitions (M&As) and undertake in-depth analysis of the key determinantsof M&A activities of firms around the world. Consider the wider issues of agency problems and corporategovernance that are associated with M&A activities.Topics covered include:Value creation in takeovers; abnormal returns; merger waves; private equity; merger arbitrage; takeover defenses;costs and benefits of concentrated ownership; modeling the takeover process.Assessment consists of coursework worth 40% of the final mark and a 1 ½ hour examination in Term 3 (April/May)equivalent to 60%.Alternative InvestmentsExplore today’s complex investment management environment and gain the insights needed to make well-informeddecisions.Topics covered include:Hedge Funds; Active currency strategies, Global Macro hedge funds and Macro Economic fundamentals; PrivateEquity; Limited Partnerships.Assessment consists of Coursework worth 30%, a 1,500 word essay worth 30% and a 2 hour examination worth 40%.Big Data AnalyticsLearn about mining, processing, analysing, and visualising large data sets to anticipate real world events andunderstand collective human behaviour. Discover key principles and concepts in big data analytics in acomputational social science context and explore a range of examples based on big data including detection of riots,disease outbreaks, and economic and financial instability.Topics covered include:Data mining of publicly available information; processing large data sets; visualising temporal data; visualising spatialdata; distributions; correlations; nowcasting and forecasting; complexity.Assessment consists of an individual assisgnment of 3000 words worth 80% and two pieces of assessed groupcoursework worth 20%.

Derivative SecuritiesExplore the rich variety of derivative contracts that exist, the ways in which they may be used and the models thatcan be used to determine their prices. Although the module covers both theory and application, it does not requirea particularly high level of mathematics. Much of the development for options pricing is based on binomial trees.The module has relevance both for potential users of derivatives and for those who need to understand riskmanagement using derivatives.Topics covered include:Arbitrage and futures prices; bounds on option prices; binomial models for options; Black/Scholes model for optionsand its applications; hedging with futures and options; stock-index options and portfolio insurance; interest-ratefutures and swaps; warrants and convertibles; exotic options.Assessment consists of a module test worth 20% of the final mark and a two-hour examination in Term 3 (April/May)equivalent to 80%.Empirical FinanceGain an understanding of the theory and practice of financial econometrics with lectures covering theory as well asempirical applications. Your practical skills will be further developed in computer-lab based seminars.Topics covered include:Introduction to the statistical framework for empirical modelling of financial time series; stationary processes; of nonstationary processes; non-linear models, including models of time varying risk, with applications in risk management.Applications will include the empirical testing of asset pricing models such as CAPM, portfolio allocation, forecasting,yield curve modelling and nonlinear adjustment in foreign exchange markets; Efficient Market Hypothesis (EMH).Assessment consists of two module tests worth 20% each, one group project worth 20%, and a one-hour exam inTerm 3 (April/May) worth 40%.Financial EngineeringExamine recent developments in financial engineering and structuring and apply your learning to real worldproblems and situations. Deepen your knowledge of particular areas that are at the forefront of academic researchin derivative markets. As this is a highly quantitative module an advanced level of mathematics is required; it isparticularly suitable if you have an undergraduate degree in mathematics.Topics covered may include:Modelling of volatility and correlation and derivative products based upon them; the pricing of derivatives oncommodities and other non-financial underlying variables; the pricing and hedging of exotic options; study of a Ponzischeme; client conflicts in designing a collateralised debt obligation.Assessment consists solely of a 3,000 word project.Financial Reporting and Financial Statement AnalysisConsider a framework for evaluating the financial performance of a company, forecasting its future performance andestimating its fundamental value. Consider the relative usefulness of cash flow and profit data for assessing financialperformance and the use of ratio analysis for evaluating past performance and forecasting future financialperformance.Topics covered include:Financial statements and their use in financial analysis; financial reporting and IFRS; reformulation of financialstatements; ratio analysis and forecasting financial performance; cash flow and accounting valuation models;valuation theory in practice; financial statement analysis; market efficiency and earnings management; issues anddevelopments in financial reporting and statement analysis; corporate governance and managementcommunication, financial statement quality and the cost of capital.Assessment consists of an individual project worth 80% of the final mark and a group presentation worth 20%.Financial Risk Management