Behavioral Finance - Foundations and Advanced Introduction

In this course, you will learn:

1. The differences between classical financial theory and behavioral finance. We outline why behavioral finance illustrates the decisions that people actually make compared to the financial decisions that individuals "should" make (depicted by expected value and utility functions).

2. Various ways individuals violate rational decision-making. These ways include: loss aversion, framing effects, and risk domain specificity.

3. Understanding prospect theory and knowing how to formulate its components, including loss aversion, diminished value sensitivity, and reference point dependence.

4. How framing and mental accounting factor into the decision-making process.

5. Applying aspects of prospect theory to make better financial decisions. From horse betting biases to the disposition effect, we learn about how prospect theory can be applied in various domains.

This course includes nearly 3 hours of lectures and included all course notes - both students notes and full instructor notes. Each of the three sections include a quiz at the end of each section for students to demonstrate their learning. Additional exercises (and solutions) are included as well.

Understanding these key concepts will give students the ability to better understand themselves, but also the world around them, whether its family/friends, colleagues or clients.

Whether you are new to finance or a financial professional, this course is for you!