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Online Course

Behavioral Finance

Duke University via Coursera

Overview

We make thousands of decisions every day. Do I cross the road now, or wait for the oncoming truck to pass? Should I eat fries or a salad for lunch? How much should I tip the cab driver? We usually make these decisions with almost no thought, using what psychologists call “heuristics” – rules of thumb that enable us to navigate our lives. Without these mental shortcuts, we would be paralyzed by the multitude of daily choices. But in certain circumstances, these shortcuts lead to predictable errors – predictable, that is, if we know what to watch out for. Did you know, for example, that we are naturally biased towards selling investments that are doing well for us, but holding on to those that are doing poorly? Or that we often select sub-optimal insurance payment plans, and routinely purchase insurance that we don’t even need? And why do so many of us fail to enroll in our employer’s corporate retirement plans, even when the employer offers to match our contributions?

Behavioral finance is the study of these and dozens of other financial decision-making errors that can be avoided, if we are familiar with the biases that cause them. In this course, we examine these predictable errors, and discover where we are most susceptible to them. This course is intended to guide participants towards better financial choices. Learn how to improve your spending, saving, and investing decisions for the future.

Syllabus

Week 1
-Welcome to the course! In this first week, we'll look at the classical economic model of consumer choice, which assumes that all of the decisions that we make are sensible, or “rational.” Once we have examined the underlying theory of how people should behave (especially around financial decisions), we will move on to examine how people do behave. We will focus in particular on situations in which we are most inclined to make decisions that appear to defy rational choice axioms.

Week 2
-Welcome to the second week. In this session, we will discover how our minds are inclined to distort probabilities, and either underestimate or overestimate the likelihood of certain outcomes. We’ll also learn about “heuristic-driven bias”: the tendency to use rules of thumb that simplify the process of making decisions, but can also lead to predictable errors. These biases negatively affect our decision-making far more than we might expect; especially when the outcome of the decision has great significance for us.

Week 3
-In the final week of the course, we will see multiple examples of how mental heuristics can lead us to make predictably sub-optimal financial decisions, both individually and across the entire financial markets. We will also discuss the many ways in which you can now improve your financial decision-making because of your deeper understanding of the innate biases that have tripped you up in the past!

Taught by

Emma Rasiel

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Reviews

3.8 rating, based on 4 reviews

Start your review of Behavioral Finance

  • Elco Lakwijk

    Elco Lakwijk completed this course, spending 4 hours a week on it and found the course difficulty to be medium.

    Good concise course on behavioral finance with emphasis on the many forms of behavioural biases. Some basic economic knowledge is advised to understand the graphs and statistics and probability calculations that are made.
  • Profile image for Maria Clarissa Fionalita
    Maria Clarissa Fionalita
    Whilst supposedly an introductory course on behavioural finance, the concepts are too concisely taught. The stories and analogies in the readings are interesting and really challenge readers to check their own biases. However, even after reading the readings, the exams are quite confusing to understand. Mainly because the concepts were not explained deeply so it's confusing. It's better to take other behavioral economics courses such as BE101x by University of Toronto or read Richard Thaler's book Nudge - which basically covers similar topics but explained in more in depth.
  • Martin Dunn completed this course.

  • Ossama Said Zaiter completed this course.

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