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MN32211: Strategic and behavioural finance decision-making

[Page last updated: 23 May 2025]

Academic Year: 2025/26
Owning Department/School: School of Management
Credits: 10 [equivalent to 20 CATS credits]
Notional Study Hours: 200
Level: Honours (FHEQ level 6)
Period:
Semester 2
Assessment Summary: CWES 40%, EXCB 60%
Assessment Detail:
  • Essay (CWES 40%)
  • Closed-book written examination (EXCB 60%)
Supplementary Assessment:
Like-for-like reassessment (where allowed by programme regulations)
Requisites:
Learning Outcomes: 1. Understand the standard rational approach to financial decision-making. 2. Consolidate understanding of the mathematical models (portfolio theory, CAPM, efficient market hypothesis, Miller-Modigliani models) of rational finance as a benchmark. 3. Analyse the effects of behavioural and psychological biases on investor decision-making. 4.Analyse the effects of behavioural and psychological biases on corporate managers' decision-making. 5. Examine investors' trading strategies and relate these to the theories of behavioural finance. 6. Consider how the lessons of behavioural finance/behavioural corporate finance can improve financial decision making at the investor and corporate level. 7. Write academically on the concepts of behavioural finance. 8. Consider how to disseminate these findings to real world investors and managers.


Synopsis: The unit will examine, in a behavioural finance framework, issues such as the effects of investor psychology and emotions on financial market investing and behaviour, as well as managerial psychology on corporate financing decisions. Using decision making theories, you will evaluate decisions such as investment appraisal, capital structure and dividends.

Content: 1. Standard models of economic and financial decision-making: Investor risk attitudes, investor utility functions, portfolio theory, CAPM, Efficient Market Hypothesis 2. Behavioural Finance:
  • Non-standard utility functions
  • Prospect Theory
  • Investor Heuristics
  • Investor overconfidence
  • Investor Emotions
  • Group dynamics (investor herding)
  • Social Preference theory: social impact investing
  • Trading strategies
3.Behavioural Corporate Finance:
  • The effect of managerial psychological biases (heuristics, overconfidence, emotions) on corporate finance decision-making:
  • Investment Appraisal
  • Capital Sttucture
  • Dividends
  • M and A
4. Completing the circle: drawing together behavioural finance and behavioural corporate finance to analyse the interaction of investors' and managers' psychology, and the effect on valuations and strategies. 5. Emotional Finance: Taffler and Tuckett's Freudian/psychoanalytical framework for analysing investors' and managers' unconscious biases, and the effect on stock market bubbles and firm valuations.

Course availability:

MN32211 is Optional on the following courses:

School of Management
  • UMMN-AFB10 : BSc(Hons) Accounting and Finance (Year 3)
  • UMMN-AKB02 : BSc(Hons) Accounting and Finance with Year long work placement (Year 4)

Notes:

  • This unit catalogue is applicable for the 2025/26 academic year only. Students continuing their studies into 2026/27 and beyond should not assume that this unit will be available in future years in the format displayed here for 2025/26.
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