Behavioural Finance and Wealth Management

FIE434 Behavioural Finance and Wealth Management

Autumn 2019

Spring 2020
  • Topics

    1. Behavioral Biases

    • What are the most important investment mistakes resulting from psychological dispositions?
    • Which behavioral biases can be moderated which shall be taken as given?
    • How do behavioral biases differ across different cultures?

    2. Decision Theory

    • Understand the differences between rational and behavioral decision theories.
    • Apply decision theories to designs structured products and asset allocations.

    3. Advisory Processes

    • Which steps shall a structured advisory process have?
    • How can the insights from behavioral finance be used in structured advisory processes?
    • How can the new IT-technologies help to facilitate advisory processes?

  • Learning outcome

    Students will obtain a broad, up-to-date understanding of behavioral finance in general and its applications to wealth management in particular.  Students will understand the research methods and the resulting models in behavioral finance.  In particular, students will:

    Knowledge - The candidate will:

    • gain advanced knowledge on different behavioral biases (e.g., home bias, disposition effect, gambler`s fallacy,...), and their effects on investment decisions.
    • understand the cultural differences responsible for those biases and will be able to structure the biases based on neurofinance research into hard and soft biases.
    • understand rational and behavioral decision theories (e.g. mean-variance, expected utility and prospect theory) and its application to the designs of structured products and the construction of portfolios.

    Skills - The candidate will be able to design:

    • structured wealth management processes based on behavioral finance.
    • risk profilers that are MiFID compliant and based on behavioral finance.
    • fair structured products.

    General competence - The candidate will:

    • become a valuable employee for financial advisors or the regulator thereof.
    • be able to set up their own advisory business, e.g. as a fintech.

  • Teaching

    Teaching is mainly based on theories that are illustrated by examples and cases.

  • Recommended prerequisites

    Basic knowledge in mathematics (bachelor level) and understanding of Microsoft Office (ppt, excel).

  • Required prerequisites

    FIE 400 E/N Investments.

  • Requirements for course approval

    Students will work in groups of up to five and solve one assignment. The assignments are a prerequisite to take the written exam.

  • Assessment

    The final grade is based on the final 4-hour written exam in which students are expected to demonstrate their skills in giving good advice by knowing behavioral biases and decision theories and by solving case studies.

    The exam will be written in English and has to be answered in English.

  • Grading Scale

    Grading scale A - F.

  • Literature

    Behavioral Finance for Private Banking. Thorsten Hens and Kremena Bachmann, Wiley Finance 2008.(the second edition).

    Slides and Assignments as well as previous exams will be available via Canvas.


ECTS Credits
Teaching language

Spring. Offered spring 2019.

Course responsible

Professor Torsten Hens, Department of Finance, NHH; Department of Banking and Finance, University of Zurich.