ITF 413 | Course Introduction and Application Information - Department of International Trade and Finance

Course Name

Introduction to Behavioral Finance

Code	Semester	Theory (hour/week)	Application/Lab (hour/week)	Local Credits	ECTS
ITF 413	Fall/Spring	3	0	3	5

Prerequisites	None
Course Language	English
Course Type	Elective
Course Level	First Cycle
Mode of Delivery	-
Teaching Methods and Techniques of the Course	Discussion Case Study Q&A Lecture / Presentation
National Occupation Classification	-
Course Coordinator	Prof. Dr. Gülin VARDAR
Course Lecturer(s)	-
Assistant(s)	-

Course Objectives	The purpose of this course is to introduce the student to the new field of behavioralfinance. In the past, one of the dominant assumptions in finance was that all investors acted rational and the markets were perfectly efficient. Because of advances in behavioral finance this view is being increasingly called into question. New work in thisarea has major implications for financial decisionmakers.
Learning Outcomes	The students who succeeded in this course; Explain key concepts and theories in behavioral finance. Analyze how psychological factors and cognitive biases affect financial decisions. Evaluate the influence of investor behavior on market efficiency and asset prices. Apply behavioral concepts to improve financial decision-making. Interpret how individual and organizational behavior impacts investment and risk tolerance.
Course Description	Behavioral finance is the application of psychology to investment behavior. It explores how various behavioral concepts such as behavioral frames, biases and heuristics impact individual investors’ decisions, market dynamics and corporate decision makings.
Related Sustainable Development Goals

Course Category	Core Courses
	Major Area Courses
	Supportive Courses	X
	Media and Management Skills Courses
	Transferable Skill Courses

Week	Subjects	Related Preparation
1	Introduction to Behavioral Finance
2	Utility Theory
3	Efficient Market Theory
4	Loss Aversion (Disposition Affect)	Shefrin and Statman (1985) The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence. Journal of Finance, 15:779-790 Odean (1998) Are Investors Reluctant to Realize Their Losses. Journal of Finance 53 (5), 1775–1798. Weber, M., and C. F. Camerer, 1998, “The disposition effect in securities trading: An experimental analysis,” Journal of Economic Behavior and Organization 33: 167-84 Mark Grinblatt, Bing Han, 2002 “The Disposition Effect and Momentum” Working Paper 8734
5	Beliefs, Biases and Heuristics (Representativeness, Availability, Attribution, Hindsight)	Poteshman (2001). Underreaction, Overreaction, and Increasing Misreaction to Information in the Options Market. Journal of Finance, LVI(3), 851-876. Grether, D. M., 1980, “Bayes’ rule as a descriptive model: The representativeness heuristic,” Quarterly Journal of Economics 95: 537-557. Barber and Odean All that Glitters: The Effect of Attention and News on the Buying Behavior or Individual and Institutional Investors. Review of Financial Studies. Della Vigna and Pollet (2006). Investor Inattention and Friday Earnings Announcements. Working Paper, UC Berkeley
6	Beliefs, Biases and Heuristics (Representativeness, Availability, Attribution, Hindsight)	Daniel, Hirshleifer and Subrahmanyam (1998). Investor Psychology and Security Market Under- and Overreactions. The Journal of Finance. 53, 1839-1885. Billett and Qian Are Overconfident Managers Born or Made? Evidence of Self-Attribution Bias from Frequent Acquirers. Management Science.
7	Beliefs, Biases and Heuristics (Overconfidence)	Barber and Odean (2001), Boys Will Be Boys: Gender, Overconfidence, and Common Stock Mistakes. Quarterly Journal of Economics , 116(1), 261-292. Richard Deaves, Erik Lüders, Guo Ying Luo "An Experimental Test of the Impact of Overconfidence and Gender on Trading Activity" Barber and Odean (2000), Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors, LV(2), 773-805. Malmendier and Tate (forthcoming), Who Makes Acquisitions? CEO Overconfidence and the Market’s Reaction. Journal of Financial Economics. *Gervalis, S, Heaton, J. B., Odean, T., 2002, The Positive Role of Overconfidence and Optimism in Investment Policy, Working paper.
8	Beliefs, Biases and Heuristics (Overconfidence)	Kirchler, Maciejovsky and Weber, (2005). Irrelevant Information, Framing Effects, and Market Behavior-An Experimental Analysis. Journal of Behavioral Finance, 5(2), 90-100 Tversky, Amos and Daniel Kahneman, “Rational Choice and the Framing of Decisions,” Journal of Business, 1986, vol. 59, no. 4, pt. 2. *Campbell and Sharpe (forthcoming) Anchoring Bias in Consensus Forecasts and its Effect on Market Prices. Journal of Financial and Quantitative Analysis.
9	Beliefs, Biases and Heuristics (Framing, Anchoring and Adjustments)	Loewenstein, George, 2002. When Genius Failed: The Rise and Fall of Long-Term Capital Management. Rabin, Matthew and Richard H. Thaler, “Anomalies: Risk Aversion,” Journal of Economic Perspectives, Winter, 2001, 219-232 Garber, Peter M., “Famous First Bubbles,” Journal of Economic Perspectives, Spring 1990, pp. 35-54. Jeremy J. Siegel and Richard H. Thaler, 1997, “Anomalies The Equity Premium Puzzle” Journal of Economic Perspectives-Volume 11, Number 1-Winter 1997-Pages 191-200
10	Beliefs, Biases and Heuristics (Herd Behavior and Momentum Investing)	Loewenstein, George, 2002. When Genius Failed: The Rise and Fall of Long-Term Capital Management. Rabin, Matthew and Richard H. Thaler, “Anomalies: Risk Aversion,” Journal of Economic Perspectives, Winter, 2001, 219-232 Garber, Peter M., “Famous First Bubbles,” Journal of Economic Perspectives, Spring 1990, pp. 35-54. Jeremy J. Siegel and Richard H. Thaler, 1997, “Anomalies The Equity Premium Puzzle” Journal of Economic Perspectives-Volume 11, Number 1-Winter 1997-Pages 191-200
11	Beliefs, Biases and Heuristics (Herd Behavior and Momentum Investing)	Loewenstein, George, 2002. When Genius Failed: The Rise and Fall of Long-Term Capital Management. Rabin, Matthew and Richard H. Thaler, “Anomalies: Risk Aversion,” Journal of Economic Perspectives, Winter, 2001, 219-232 Garber, Peter M., “Famous First Bubbles,” Journal of Economic Perspectives, Spring 1990, pp. 35-54. Jeremy J. Siegel and Richard H. Thaler, 1997, “Anomalies The Equity Premium Puzzle” Journal of Economic Perspectives-Volume 11, Number 1-Winter 1997-Pages 191-200
12	Preference and Anomalities in the Financial Markets
13	Presentations
14	Presentations
15	Semester Review
16	Final Exam

Course Notes/Textbooks

Articles and Book chapters indicated above, presentation notes, current news

Suggested Readings/Materials

Forbes, W., 2009. Behavioural Finance. New York: John Wiley & Sons. ISBN: 978-0-470-02804-9

Lowenstein, R., 2001. When Genius Failed: The Rise and Fall of Long-Term Capital Management. Random House Trade. ISBN: 978-0375758256

Semester Activities	Number	Weigthing
Participation
Laboratory / Application
Field Work
Quizzes / Studio Critiques
Portfolio
Homework / Assignments	1	30
Presentation / Jury	1	30
Project
Seminar / Workshop
Oral Exams
Midterm
Final Exam	1	40
Total

Weighting of Semester Activities on the Final Grade	2	60
Weighting of End-of-Semester Activities on the Final Grade	1	40
Total

Semester Activities	Number	Duration (Hours)	Workload
Theoretical Course Hours (Including exam week: 16 x total hours)	16	3	48
Laboratory / Application Hours (Including exam week: '.16.' x total hours)	16		0
Study Hours Out of Class	14	2	28
Field Work			0
Quizzes / Studio Critiques			0
Portfolio			0
Homework / Assignments	1	24	24
Presentation / Jury	1	20	20
Project			0
Seminar / Workshop			0
Oral Exam			0
Midterms			0
Final Exam	1	30	30
		Total	150

#	Program Competencies/Outcomes	* Contribution Level
#	Program Competencies/Outcomes	1	2	3	4	5
1	To be able to identify and analyze problems in the field of trade and finance, and to develop solutions.	-	-	-	X	-
2	To be able to apply theoretical and practical knowledge of international trade and finance to real-world professional contexts.	-	-	-	X	-
3	To be able to critically analyze global market developments and evaluate their implications for business and policy.	-	-	-	-	-
4	To be able to collect, analyze, and interpret financial and economic data by using digital and information technologies effectively.	-	-	-	-	-
5	To be able to understand and interpret legal frameworks, regulations and practices relevant to international trade and finance.	-	-	-	-	-
6	To be able to anticipate, define, and manage financial and trade-related risks through informed decision-making.	-	X	-	-	-
7	To be able to acquire and use verbal, written, and numerical skills effectively for the nature of international trade and finance program.	-	-	-	-	-
8	To be able to obtain, synthesize, and report trade- and finance-related information clearly and effectively.	-	-	-	-	-
9	To be able to contribute effectively as individuals, team members, and leaders in multidisciplinary environments.	-	-	-	-	-
10	To be able to evaluate trade and finance issues from ethical, social, and sustainability perspectives.	-	-	-	-	-
11	To be able to collect data in the areas of International Trade and Finance and communicate with colleagues in a foreign language ("European Language Portfolio Global Scale", Level B1).	-	-	-	-	-
12	To be able to speak a second foreign at a medium level of fluency efficiently.	-	-	-	-	-
13	To be able to relate the knowledge accumulated throughout human history to their field of expertise.	-	-	-	-	-