Portfolio Theory and Behavioral Finance
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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.
This course is a component of the Advanced Portfolio Management Professional Certificate.
- 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
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
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
- Implementing behavioral portfolio management
- Value, growth and momentum strategies
WHAT YOU'LL LEARN
- Survey the theory of decision making under uncertainty
- Understand the implications of moderrn portfolio theory for real-world portfolio management
- Review cutting edge developments regarding multi-factor portfolio models
- Be aware of the key propositions of behvaioral finance theory
- Crtically assess the implications of behavioral finance for real-world portfolio management
Who should attend
- Portfolio managers
- wealth managers and financial advisors.