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Stock Market and Behavioral Finance

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21 views2 pages

Stock Market and Behavioral Finance

Uploaded by

bishalsandhya003
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Stock Market and Behavioral Finance

FIN 618
Credit hrs. 2
Semester IV Lecture hrs. 32

Course Description

This course deals with the stock market and behavioral finance. The objective of this course is to
introduce the students to both the theory and practical approaches of capital and stock market
operations. The student should obtain a broad knowledge of capital and stock market operations
with avenues of the more important forms of investment. This course exposes students to the
structure of financial markets both in Nepal as well as global perspective, the primary market,
secondary market, trading mechanism of stock, stock market related regulations and directives.
The course also includes developing investment strategies as a value and growth investor
considering behavioral finance and using fundamental and technical analysis and be aware of
financial bubbles and crisis. This course is designed from an investor’s and portfolio manager’s
perspective focusing on the investment decision. The emphasis is on developing skills,
competencies, techniques and knowledge of students related to successfully understand and
manage investment fund.

Learning Outcomes

On completion of the course, students are expected to be able to:

• Gain an overview of how stock market operates and is regulated


• Analyze securities by using technical trading rules and indicators
• Explain the fundamentals of efficient market hypothesis (EMH) and how it contradicts
with technical analysis
• Understand financial anomalies, market crashes, bubbles, and how behavioral finance
explain them
• Understand prospect theory, cognitive and emotional biases, and explain stock market
behavior from those perspectives
• Develop stock market strategies incorporating behavioral considerations.

Course Details
Unit 1: Overview of Capital Markets 5 hrs.
Capital and money markets; Primary and secondary markets; Organized exchanges and
OTC markets; Trading mechanism, transaction costs and price limits; Stock market
indicators; Regulations and the regulator of the capital market.
Unit 2: Technical Analysis 6 hrs.
Underlying assumption of technical analysis; Advantages of technical analysis; Challenges to
technical analysis; Technical trading rules and indicators.

Unit 3: Efficient Market Hypothesis 4 hrs.


Efficient market hypothesis (EMH); Theoretical and empirical foundation of EMH; Level
of market efficiency; Limit to arbitrage; Empirical evidences on efficient market
hypothesis.
Unit 4: Financial Anomalies 4 hrs.
Fundamental anomalies; Technical anomalies; Calendar anomalies.
Unit 5: Financial Market Bubbles and Crashes 4 hrs.
The 1929 and 1987 stock market crash; The dot.com/tech bubble;
The 2008 world financial
and economic crisis; Behavioral finance perspective on financial crisis, trends of financial
crisis.
Unit 6: Behavioral Finance 5 hrs.
Introduction of behavioral finance; Prospect theory; Cognitive Biases; Emotional biases.
Unit 7: Strategies to Investing in Capital Market 4 hrs.
Security analysis: Stock and fixed-income; Value investing vs. Growth investing
strategies; Behavioral consideration for value investing vs. growth investing.
Suggested Readings
• 1. Fabozzi, F. J. & Modigliani, F., Capital Markets: Institutions and Instruments. New
Delhi: PHI Learning.
• 2. Pompian, M. M., Behavioural Finance and Wealth Management, New York: Wiley.
• 3. Shleifer, A., Inefficient Markets: An Introduction to Behavioral Finance, New York:
Oxford University Press.
• 4. Shefrin, H., Beyond Greed and Fear, New York: Oxford University Press.
• 5. Reilly, F. K. & Brown, K. C., Investment Analysis Portfolio Management, New
Delhi: Cengage Learning India.
Note: Latest edition of the suggested readings will be used and the faculty may recommend
additional reading materials.

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