Portfolio Theory and Behavioral Finance
Develop a thorough understanding of the implications of behavioral finance for portfolio management. Critically assess the competing claims of behavioral finance and modern portfolio theory for real-world portfolio management.
CPE Credits: 7
This course is a component of the Advanced Portfolio Management Professional Certificate.
Prerequisite knowledge:
- Knowledge of portfolio theoretic concepts including mean-variance measures, portfolio diversification, systematic risk
- Intermediate MS Excel skills (data tables, lookup functions, solver, etc.)
- Knowledge of elementary calculus, probability theory and statistical methods
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To make it even easier to learn, you can finance your program through Affirm.
Loans offered through Affirm are available in the U.S. and Canada.
Module 1: Risk Aversion: The Psychology of Risk
- Decision making under uncertainty
- Utility functions and measures of risk aversion
- Overview of prospect theory
- Cognitive biases
- Framing
Module 2: Modern Portfolio Theory
- Review of the Capital Asset Pricing Model (CAPM)
- Two fund separation
- Arbitrage pricing theory and multi-factor models
- Does the theory work? A review of the evidence
- A three-factor model
Module 3: A Behavioral Approach to Portfolio Management
- Trading Biases
- Hanging on to losers: The disposition effect
- Under-diversification
- Herding
- Implementing behavioral portfolio management
- Value, growth and momentum strategies