Behavioural Finance

 

Coursework – 2200 Words
In 2017, economist Richard Thaler was awarded the Nobel Prize in Economic Sciences. Critically evaluate the following prediction made by Richard Thaler (1999) in an article titled “The End of Behavioural Finance”, using theory and examples:

“…, many respectable financial economists work in the field called behavioural finance. I believe the area no longer merits the adjective “controversial.” Indeed, behavioural finance is simply a moderate, agnostic approach to studying financial markets. Nevertheless, I too predict the end of the behavioural finance field, although not for the reasons originally proposed. … I predict that in the not-too-distant future, the term “behavioural finance” will be correctly viewed as a redundant phrase. What other kind of finance is there? …, economists will routinely incorporate as much “behaviour” into their models as they observe in the real world. After all, to do otherwise would be irrational.”

Marking Scheme:
1. A theoretical analysis on the importance of Behavioural Finance and its comparisons with traditional finance theory. Key differences in basic assumptions between Behavioural Finance and standard finance; the development of Behavioural Finance; market anomalies; the advantages and limitations of Behavioural Finance compared to standard finance; future directions of Behavioural Finance (40%);

2. Evaluate the role of Behavioural Finance in real financial markets. Give one or two examples of historical market events that cannot be fully explained by standard finance. Use factual (statistical, financial, historical) information (from a reputable source) to illustrate the event(s). Identify key behavioural heuristics that can be observed in these market events and select key research results from various journal papers and books to demonstrate your understanding of these behavioural biases. Explain the role of these behavioural forces in the event(s) (50%);

3. Your essay should be well structured, written with clarity, coherent, correctly referenced, and free from grammar and spelling mistakes (10%)

Length of Essay: about 2,200 (+/- 10%) words
Instructions PLEASE READ CARFULLY:
The word processed essay should be around 2200 words (excluding references, appendices and numerical/data tables) plus or minus 10 per cent.
Please use 1.5 line spacing and a font size of no less than 12 in your essay.
All information must be appropriately sourced and referenced using the Harvard referencing system, both in-text and in the references list.
Please ensure that all information used is from an appropriate source.
PLEASE ONLY USE ONLY ACADEMIC REFEERNCES PREFER UK BASED BECAUSE ITS AN UK COURSEWORK
DO NOT USE: Inappropriate sources of information, such as Wikipedia, tutor2you, Investopedia, descriptive websites etc., will result in a loss of marks.
Please make sure its Harvard Referencing
THIS IS A UNITED KINGDOM (UK) BASED PAPER
PLEASE USE THE MARKING SCHEME ABOVE

Sample Solution

ACED ESSAYS