HADM 6232

Behavioral Finance

Course Description

Course information provided by the 2026-2027 Catalog.

The traditional framework for thinking about financial markets assumes that all market participants are fully rational. Over the past four decades, behavioral finance has emerged as one of the most important paradigm shifts in financial economics, arguing that many market phenomena result from less-than-fully rational thinking among investors, managers, and households. This course provides an in-depth discussion of the field. We first revisit topics in finance from a behavioral finance perspective: markets (stock market fluctuations, popular investment strategies, bubbles); investor behavior (poor investment decisions by households); and corporate finance (security issuance, investments, mergers and acquisitions). We then discuss recent developments in the field, for example, information processing and memory, housing and credit cycles, ESG investing, entrepreneurial decision-making, and the emerging intersection of AI and human bias in financial contexts. A running theme in the course is that knowledge of behavioral finance is essential for anyone who seeks a full understanding of modern financial markets. Over the course, we will draw intuitions from dozens of academic papers.

Prerequisites HADM 2250, HADM 2220, AEM 2240, AEM 2241, AEM 5241, NCC 5560, or HADM 7230.

Forbidden Overlaps AEM 4230, AEM 5230, AEM 4231, AEM 5231, AEM 4232, AEM 5232, HADM 4232, HADM 6232

Last 4 Terms Offered 2025FA

Learning Outcomes

• Develop a basic understanding of how human psychology affects investor behavior, asset prices, and firm behavior in financial markets.
• Develop a basic understanding of behavioral finance frameworks that make sense of important financial phenomena.
• Become familiar with frontier topics and future directions of behavioral finance.

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