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behavioral finance master thesis

This section will inform you about the possibility of having your thesis supervised by the Behavioral Finance Research Group.

Building on our contents in teaching, we offer the opportunity to write a thesis at the Behavioral Finance Research Group.

Department's best thesis of 2019 supervised at the Behavioral Finance Research Group

Admission requirements 

Bachelor's thesis:

  • Major "Accounting & Finance"
  • Successful attendance of  Entrepreneurial Finance.  

Master's thesis :

  • Successful attendance of one of the institute’s seminars .
  • Attendance of  Behavioral Finance is strongly recommended.
  • Attendance of  Quantitative Methods in Empirical Finance is strongly recommended.

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Summer term: March 1st Winter term: September 1st  

Application procedure

Inhalt ausklappen Inhalt einklappen Application

The Application should consist of: - Letter of Motivation (max. one page) - CV - Current transcript of records (grades)

Inhalt ausklappen Inhalt einklappen Topic assignment

The assignment of the topics takes place in a personal meeting with a member of the chair The topics are oriented towards research topics of the chair: - Behavioral Finance - Entrepreneurial Finance - Household Finance Accepted thesis topics include a self-directed empirical analysis.

Inhalt ausklappen Inhalt einklappen Exposé creation

After the assignment of the topic an exposé (1-2 pages) has to be prepared. It should cover the following content: - Problem definition - Objectives - Procedure - Provisional structure - Basic literature

Inhalt ausklappen Inhalt einklappen Registration at the examination office

The application is done by submitting the application for admission to the Examination Office. The filing date is April 1st, or October 1st.

Please send your application to [email protected]  within the stated deadlines.

General Remarks:

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  • Formal guideline for writing term papers and theses  and Write your best paper .

behavioral finance master thesis

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behavioral finance master thesis

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behavioral finance master thesis

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behavioral finance master thesis

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If you are interested in writing your Bachelor or Master thesis at our chair, please contact us in order to make an appointment for a discussion of a possible topic.

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Overconfidence and active management by pension fund managers., customer segmentation in swiss retail banking., auch in china werden die schweizer banken lernen müssen, nein zu sagen., märkte für derivate und strukturierte produkte - ein globaler vergleich., hat finance eine kulturelle dimension, relation between equity home bias and ambiguity aversion: an international study., behavioral determinants of home bias-theory and experiment. ssrn working paper., ambuigity aversion, information unvertainty and momentum around the world., are top-tens better a study on investor attention and ranking lists., how time preferences differ: evidence from 52 countries., does finance have cultural dimension, prospect theory in behavioral finance. ., earnings optimism in green stocks.

Liu, Y., Wang, M., Yang, X. (accepted pre-print), Earnings optimism in green stocks, Journal of Sustainable Finance & Investment .

Economic policy uncertainty and the Bitcoin market

Huynh, T. L. D., Wang, M., Vo, V. X. (accepted pre-print), Economic policy uncertainty and the Bitcoin market: an investigation in the COVID-19 pandemic with transfer entropy, The Singapore Economic Review .

Earnings expectations of grey and green energy firms

Liu, Y., Blankenburg, M., Wang, M. (2023), Earnings expectations of grey and green energy firms: analysis against the background of global climate change mitigation, Energy Economics , Vol. 121, 106692.

Energy structure and carbon emission

Liu, Y., Xie, X., Wang, M. (2023), Energy structure and carbon emission: analysis against the background of the current energy crisis in the EU, Energy Economics , Vol. 280, 128129.

Economic individualism, perceived fairness, and policy preference

Wang, M. (2023), Economic individualism, perceived fairness, and policy preference: a cross-cultural comparison, Review of Behavioral Economics , Vol. 10 (1), pp. 3-26.

New experimental evidence on the relationship between home bias, ambiguity aversion and familiarity heuristics

Dlugosch, D., Horn, K., Wang, M. (2023), New experimental evidence on the relationship between home bias, ambiguity aversion and familiarity heuristics, Journal of Economics and Business , Vol. 125-126, 106131.

Trust and the stock market reaction to lockdown and reopening announcements

Xie, L., Wang, M., Huynh, T. L. D. (2022), Trust and the stock market reaction to lockdown and reopening announcements: a cross-country evidence, Finance Research Letters , Vol. 46, Part A, 102361.

Trust in government actions during the COVID-19 crisis

Rieger, M., Wang, M. (2022), Trust in government actions during the COVID-19 crisis, Social Indicators Research , Vol. 159 (3), pp. 967–989.

COVID-19 and the Wuhan diary –how does the overseas Chinese community react to group criticism?

Wang, M., Rieger, M. (2022), COVID-19 and the Wuhan diary –how does the overseas Chinese community react to group criticism?, Journal of Chinese Political Science , Vol. 37 (4), pp. 637–659.

Ambiguity, ambiguity aversion and foreign bias

Dlugosch, D., Wang, M. (2022), Ambiguity, ambiguity aversion and foreign bias: new evidence from international panel data, Journal of Banking & Finance , Vol. 140, 106509.

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behavioral finance master thesis

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The role of risk in investment behaviour and the manifestation of behavioural biases by individual investors

Suhobokov, Alexander (2021) The role of risk in investment behaviour and the manifestation of behavioural biases by individual investors. PhD thesis, University of Glasgow.


I use a novel dataset based on 8,000 retail clients of a large brokerage house over four years to evaluate if individual investors take decisions according to one of the dominating decision-making theories – traditional Expected Utility Theory or behavioural Prospect Theory. Another key question of my research is the role of affect in judgements and its impact on investment results and behaviour. The thesis includes three related empirical chapters. In the first empirical chapter, I explore how (ir)rational are retail investors and what are the boundaries of their rationality proxied with the relation between realised risk and return. In the second empirical chapter, I examine how the correlation between risk and return for the same group of investors varies in Live trading environment versus virtual Contest environment highlighting the role of emotions in correlation dynamics. In the third empirical chapter, I keep the emphasis on comparing Live and Contest investment settings, but now I evaluate the impact of emotions on profitability and various manifestations of risk behaviour. My research contributes to the academic literature in the domain of finance and investments that is trying to establish the positioning and the role of emotional account in the judgement and decision-making of economic agents. I provide empirical evidence that feelings have a substantial impact on investment results and risk behaviour of individual traders. The empirical nature of my analysis involving a large group of private investors grants significant support to prior findings that predominantly developed using neuro-physiological, interview-type and experimental methodologies. Besides, I present empirical support for the long-lasting debate concerning traditional and behavioural financial theories. Analysing the relation between risk and return, I manage to validate that investors in my sample manifest all behavioural patterns implied by Prospect Theory: they are risk-averse in the gains domain, risk-seeking in the losses domain and exposed to the loss aversion bias.

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Item Type: Thesis (PhD)
Qualification Level: Doctoral
Keywords: behavioural finance, individual investors, individual decision making, risk-as-feelings.
Subjects: >
Colleges/Schools: > >
Supervisor's Name: Siganos, Dr. Antonios and Hung, Dr. Chi-Hsiou
Date of Award: 2021
Depositing User:
Unique ID: glathesis:2021-81951
Copyright: Copyright of this thesis is held by the author.
Date Deposited: 27 Jan 2021 17:52
Last Modified: 28 Jan 2021 07:59
Thesis DOI:
URI:
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Applied Behavioral Finance

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STUDY ON BEHAVIORAL FINANCE, BEHAVIORAL BIASES, AND INVESTMENT DECISIONS

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Behavioral finance is an open-minded finance which includes the study of psychology, sociology, and finance. Behavioral finance micro examines behavior or biases of investors and behavioral finance macro describe anomalies in the efficient market. Nowadays, behavioral finance is not a new concept, the existence, and impact of behavioral biases in investor's behavior and human judgment are huge. In this paper, we will review various studies in this area so as to have a clear understanding of the behavioral finance and its significance in the financial decision making of investors. JEL CLASSIFICATION: G11, G14

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Traditional finance theory is based on the principle of maximization of utility and explains how choices are made by rational people. Although the theory provides numerous insights, observation of actual behavior of people was seen to be different from what the theory predicted. The homo economicus is in reality a homo sapien who has emotions and beliefs that help to filter the content from his or her environment. These beliefs and preferences that arise due to cogni-tive limitations, presence of emotions, and various psychological motives guide or bias his or her decisions. Much literature states that the biases should be corrected as they negatively impact financial behaviour and individual's well‐being. However, evolutionary psychology considers biases as design features of human mind. Thus, biases are not always bad, as at times, these biases can help the individual investor to choose the best course of action from the multiple possibilities and enable committing the less costly mistakes, thereby helping the individual to achieve satisficing behaviour. This paper aims to explore the investor biases and see whether they are related to the financial satisfaction of the individuals. Financial satisfaction is the measure of satisfaction with one's financial situation. The results showed that overconfidence bias, reliance on expert bias, and self‐control bias have a positive and significant association with financial satisfaction levels. Association of a few other biases with financial satisfaction was also observed under certain control conditions. This study provides further insights on investor behavior and paves the way for various possibilities for future research.

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Research has proved that investors in the equity market are not consistently rational. Emotions influence their decision making process in the complex environment of equity market, in the form of behavioral biases. This paper reviews five important behavioral biases exhibited by investors in the equity market. The behavioral biases reviewed include, representativeness, anchoring, gambler?s fallacy, availability and optimism. The literature available for each of the biases is reviewed and hence this paper draws attention to a new dimension in finance.

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Finance is the system that includes the granting of money and credit, making of investments and provision of banking facilities. Behavioral finance is a new academic discipline which seeks to apply the insights of the psychologists to understand the behavior of both investors and financial markets. This study analyse the Investors behavior through 600 respondents using Factor analysis test. The results of the study show that the 16 variables selected for the study had been reduced to 5 factor models using the principle component analysis such as Market Dynamics, Logical Analysis , Herding Bias, Regret Aversion and Heuristic Bias. Thus, Behavioral finance is becoming a primary part of the decision making process, since it influences investors' behavior greatly.

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Investment Decisions and Behavioral Finance

Program Fee: The program fee includes tuition, curricular materials and most meals. Housing is not included. 

Program Overview

Common biases. Irrational investment behaviors. Decision-trap situations. In today’s complex and rapidly changing financial markets, senior executives responsible for managing client assets need to understand these and other factors that can lead to sub-optimal outcomes for investors.

Investment Decisions and Behavioral Finance is an intensive two-day program from Harvard Kennedy School Executive Education. It will expose you to the central principles and latest findings of the psychology of decision making under conditions of risk and uncertainty.

Led by Faculty Chair Richard Zeckhauser, this on-campus program focuses on practical applications for professionals who manage assets and construct portfolios for investment clients. 

The previous session included:

Dinner Speaker:

  • Seth Klarman , CEO & Portfolio Manager, The Baupost Group

Lunch Speaker: 

  • Owen Lamont , Senior Vice President and Portfolio Manager, Acadian Asset Management

Senior Professor Faculty Speakers:

  • Larry Summers , University Professor, Harvard University
  • Richard Zeckhauser , Harvard Kennedy School
  • Jason Furman , Harvard Kennedy School and Economics Department
  • Iris Bohnet , Harvard Kennedy School
  • Robin Greenwood , Harvard Business School
  • Samuel Hanson , Harvard Business School
  • David Laibson , Harvard Economics Department
  • Nicholas Barberis , Yale School of Management
  • Michael Mauboussin​​​​​​ , Morgan Stanley Investment Management, Columbia 
  • Annie Duke , Poker World Champion

PROGRAM CURRICULUM

Developed by Harvard Kennedy School faculty, Investment Decisions and Behavioral Finance  explores the science behind investment decision making.

The program opens with a networking dinner, followed by two days of classroom sessions. You will take part in thought-provoking discussions and interactive learning exercises with leading behavioral finance professionals and academics.

Reflecting the most current research and issues in the financial markets, the curriculum focuses on:

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  • Crash beliefs from investor surveys
  • Global outlook, debt cycles, and monetary policy
  • The challenges and opportunities of the aging investor
  • Gender retirement gaps
  • Big data, smart beta, and other things investors fear
  • Methods to improve decisions

LEARNING OBJECTIVES

Investment Decisions and Behavioral Finance will help you understand:

  • The applied science of effective decision making
  • How our brains are not wired to make the decisions that modern financial markets require—and ways to adjust for these shortcomings
  • How and why financial bubbles develop and strategies for recognizing them
  • The psychological reasons that lead investors to make severe investment errors

Application Information

Recommended applicants.

This on-campus program from Harvard Kennedy School Executive Education is designed for mid to senior level leaders and executives in the financial and investment community who are interested in hearing the perspectives of intellectual thought leaders and leading practitioners.

Professionals who would find value in this program include:

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Sample Schedule

Immerse yourself with a cohort of fellow leaders on Harvard’s historic campus. View the draft  program schedule . Note that module titles, speakers, and sequence may change.

WHAT PARTICIPANTS ARE SAYING

"as a board member of one of the largest pension funds in america, i found this to be the most valuable class i have ever taken.", bruce perelman, former secretary of the board of investments, hear from the faculty chair.

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What is Behavioral Finance?

behavioral finance master thesis

Behavioral finance is the study of the psychological factors, emotions and subconscious beliefs of investors and how they can affect decision-making. 

"Behavioral finance is the application of cognitive psychology to finance,” says Bradley Klontz, PsyD, CFP®, associate professor of practice in the Department of Economics and Finance at Creighton University. “Cognitive psychology examines how people acquire, process and store information, and it explores ways in which that affects emotions and behavior.”

Advisors now find themselves managing client behavior, and this is at the heart of behavioral finance.

“The relationship between advisor and client has become the most important aspect of financial planning,” says Klontz. “It's not about products. It's not about the investment portfolios. It's now the relationship that the advisor establishes with the client and the role they're playing in their client's life. 

“That role has now expanded beyond just selling products and managing portfolios."

Why is behavioral finance important?

Financial professionals use behavioral finance to help their clients identify and overcome certain psychological biases so they can make better financial decisions.

“If we understand what drives people to act irrationally in regard to their finances, experts can begin to build a framework to help people make better decisions—and that can help us better understand market behavior overall,” Klontz says.

“Understanding behavioral finance can help you better serve your clients,” he adds.

5 common psychological biases that affect investor decision-making

One of the key aspects that behavioral finance studies is the influence of psychological biases. Also known as cognitive biases, these are systematic errors in thinking that can sway our judgments and decision-making.

"All of these biases can be self-destructive in our current environment of modern finance,” Klontz says. “They can be explained by our prehistoric brain that was just trying to survive in a hunter-gatherer environment.

“It's only in recent times that we've even dealt with an abstract thing called money or investing. When we become emotionally charged, we become rationally challenged, and these biases kick in. We make these decisions from our emotional brain—which worked great in terms of our survival as a species—but it may not be as beneficial to us in our modern financial lives."

1. Loss aversion

Loss aversion is our natural tendency to avoid experiencing a real or perceived loss. This, in turn, affects how we make decisions relating to our finances.

"For example, with stocks, we have a disposition to hold on to losing stocks and sell winning stocks, which is the absolute opposite of what you should be doing,” Klontz says. “And part of that is because of our aversion to loss. If I have an investment that has tanked, selling it would mean admitting defeat. I would have to sit with the idea that I made a mistake. If I don't want to have that experience, I may hold onto it, even though it may be in my best interest to sell."

2. Familiarity bias

Familiarity bias is a cognitive bias that causes people to prefer familiar options over unfamiliar ones, even when the unfamiliar options may be better.

“The more familiar we are with something, the more likely we are to make bad decisions about it,” says Klontz. “It's part of our inherent cognitive laziness, and it's also related to safety and survival.

“Say you're looking at two potential food sources: one you’ve eaten for years and years, and one you've never seen before. That new food source might actually be healthier for you, but it's probably a good idea not to try it because it might kill you. So we have this natural tendency to prefer what’s familiar."

3. Herd instinct

Herd instinct (or herd mentality) refers to investors’ tendencies to follow what other investors are doing rather than their own research and analysis. 

"If everyone in your tribe got up and started sprinting south, it's a good idea for you to get up and start sprinting south,” Klontz says. “The people who didn't do that got picked off by a saber-toothed tiger."

A similar concept applies here.

“When we see people around us jumping into or out of a particular investment or asset class, it goes against our nature to sit still or do the opposite,” Klontz says. “The herd instinct helps explain every investment bubble and crash we have had throughout history.”

4. Overconfidence bias

Overconfidence bias is the tendency of investors to overestimate their knowledge and financial abilities. One of the key ways we see this bias play out is that, on average, women are better investors than men.

“And when we say better, we're talking as high as 1% annual return on average, which is huge,” Klontz says, referring to a pioneering study that examined gender and overconfidence.

“One of the reasons for this is that women may feel less confident in their ability to predict the right investments,” he says. “Men, in turn, tend to feel overconfident in their abilities, which causes them to trade more than women. By trading more, they hurt their performance.”

A study by Fidelity Investments confirms this. Based on an analysis of annual performance of 5.2 million accounts, the study found women investors tend to achieve positive returns and outperform men by 40 basis points.

5. Status quo bias

The status quo bias is people’s preference for things to stay as they are by sticking with a decision made previously. “This is our desire to keep things the way they are,” Klontz says. “So even in situations in which we should take action, doing nothing is our natural default and can work against us.”

Behavioral finance and the CFP® certification

CERTIFIED FINANCIAL PLANNER® certification is considered the standard of excellence in financial planning. The CFP Board now lists “psychology of financial planning” as one of the eight principal knowledge domains covered in the CFP® certification exam. “The fact that the CFP Board identified the psychology of financial planning as a formal knowledge topic to become a CERTIFIED FINANCIAL PLANNER® is indicative of how important behavioral finance has become,” Klontz says. 

Which roles use behavioral finance in their day-to-day functions?

Regardless of whether you go on to earn the CFP® certification or not, a solid knowledge of behavioral finance is needed for the following roles, according to Klontz: 

  • Financial planners
  • Financial advisors
  • Financial coaches
  • Behavioral finance directors
  • Financial wellness coordinators/financial wellness managers
  • Financial therapists

Gain a competitive edge with a master’s in financial planning and financial psychology

If you’re interested in behavioral finance and/or want to prepare to sit for the CFP® exam, earning an online Master's in Financial Planning and Financial Psychology may be a good idea. The Creighton University program is one of the few graduate business programs in the country with a heavy emphasis in financial psychology taught by leading experts in the field.

Ready to learn more? Request more information today —one of our Creighton University Student Success Managers will reach out.

Disclaimer : Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, and CFP® (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.  

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