BEHAVIORAL FINANCE

Important Topics from

Thakurs Notes:
UNIT 1
1. Basics of Behavioural Finance:
Concept (Pg 12)
Meaning and Definition (Pg 12)
Nature (Pg 13)
Objectives (Pg 15)
Significance (Pg 16)
2. Basics of Psychology:
Meaning & Definition (Pg 18)
3. Psychology of Financial Market (Pg 20)
4. Psychology of Investor Behaviour (Pg
24)
5. Prospect Theory (Pg 24-25)
UNIT 2
1. Cognitive Psychology
a. Meaning (Pg 32)
b. Features (Pg 33)
c. Beliefs (Pg 34-37)
2. Arbitrage
a. Meaning (Pg 39)
b. Arbitrageur (Pg 40)
c. Costs Involved (Pg 46)
d. Risk vs. Horizon (Pg 49)
3. Game Theory
a. Meaning (Pg 54)

b. Application (Pg 55)

4. Decision Theory (Pg 60-61)
5. SEUT and VNMT (Only definitions) (Pg
71 & 72)
UNIT 3
1.
2.
3.
4.
5.
6.

Rationality (Pg 76-80)

Bounded Rationality Model (Pg 86)
Problems of Average Investors (Pg 89)
Belief Biases (Pg 90-93)
Bubbles (Pg 96-97)
Systematic Investor Sentiment (Pg
103-104)

UNIT 4
1.
2.
3.
4.

Different types of Investors (Pg 109)

Types of Internal Factors (Pg 115)
Types of External Factors (Pg 116-117)
Relationship between fear and greed
(Pg 123)

UNIT 5
1. Behavioural Corporate Finance (Pg
140-141)
2. Corporate Dividend Policy (Pg 142)
3. Timing of Good and Bad Corporate
News Announcement (Pg 147-150)
4. Systematic Approach of using
Behavioural Factors in Corporate
Decision Making (Pg 152-154)