Biases and Portfolio Selection

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Opleiderscore: starstarstarstar_borderstar_border 6,3 Coursera (CC) heeft een gemiddelde beoordeling van 6,3 (uit 4 ervaringen)

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About this course: Investors tend to be their own worst enemies. In this third course, you will learn how to capitalize on understanding behavioral biases and irrational behavior in financial markets. You will start by learning about the various behavioral biases – mistakes that investors make and understand their reasons. You will learn how to recognize your own mistakes as well as others’ and understand how these mistakes can affect investment decisions and financial markets. You will also explore how different preferences and investment horizons impact the optimal asset allocation choice. After this course, you will be more effective in overcoming biases to do the wrong things at the…

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When you enroll for courses through Coursera you get to choose for a paid plan or for a free plan

  • Free plan: No certicification and/or audit only. You will have access to all course materials except graded items.
  • Paid plan: Commit to earning a Certificate—it's a trusted, shareable way to showcase your new skills.

About this course: Investors tend to be their own worst enemies. In this third course, you will learn how to capitalize on understanding behavioral biases and irrational behavior in financial markets. You will start by learning about the various behavioral biases – mistakes that investors make and understand their reasons. You will learn how to recognize your own mistakes as well as others’ and understand how these mistakes can affect investment decisions and financial markets. You will also explore how different preferences and investment horizons impact the optimal asset allocation choice. After this course, you will be more effective in overcoming biases to do the wrong things at the wrong times and tailoring an investment strategy that is best suited on your or your client’s profile and investment needs.

Created by:  Rice University
  • Taught by:  Arzu Ozoguz, Finance Faculty

    Jones Graduate School of Business
Basic Info Course 3 of 5 in the Investment and Portfolio Management Specialization Commitment 4 weeks of study Language English How To Pass Pass all graded assignments to complete the course. User Ratings 4.4 stars Average User Rating 4.4See what learners said Coursework

Each course is like an interactive textbook, featuring pre-recorded videos, quizzes and projects.

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Syllabus


WEEK 1


Efficient markets hypothesis and limits of arbitrage



This module introduces the third course in the Investment and Portfolio Management Specialization. In this module, we first present the efficient market hypothesis (EMH) – another pillar idea of modern finance. You will learn about its rationale as well as the empirical evidence that supports and challenges the predictions of the EMH such as anomalies. Finally, we will consider why smart money may sometimes fail to exploit away anomalies in financial markets.


9 videos, 12 readings, 2 practice quizzes expand


  1. Video: Introduction and welcome to class
  2. Reading: Grading Policy
  3. Reading: How to use discussion forums
  4. Reading: Meet & Greet: Get to know your classmates
  5. Reading: Pre-Course Survey
  6. Video: Efficient Markets Hypothesis (EMH)
  7. Video: Examples of market efficiency: Market efficiency in real time
  8. Video: Three Versions of Efficient Market Hypothesis
  9. Reading: Watch market efficiency in real time
  10. Reading: Real Time Market Efficiency
  11. Reading: Lecture Handouts: Efficient Markets Hypothesis (EMH)
  12. Practice Quiz: Efficient markets hypothesis
  13. Video: Event studies
  14. Video: Anomalies
  15. Video: Mutual fund and analyst performance
  16. Reading: Lecture Handouts: Are markets efficient?
  17. Reading: EntreMed Case
  18. Practice Quiz: Are markets efficient?
  19. Video: Smart investor should make markets efficient, right?
  20. Reading: New Facts in Finance (optional)
  21. Reading: Lecture Handouts: Limits to arbitrage
  22. Video: Efficient Market Hypothesis
  23. Reading: Module 1: Quiz solutions
  24. Discussion Prompt: Forum question on market efficiency and passive strategy

Graded: Anomalies
Graded: Efficient markets and limits of arbitrage

WEEK 2


Biases and realistic preferences



In this module, we review the behavioral critique of market rationality. In contrast to the presumption that investors are rational, behavioral finance starts with the assumption that they are not. We will examine some of the information-processing and behavioral biases uncovered by psychologists in several contexts. In addition, we will consider alternative, more realistic ways of describing investor preferences.


12 videos, 10 readings, 1 practice quiz expand


  1. Video: Introduction
  2. Video: What are heuristics-driven biases?
  3. Video: Representativeness
  4. Video: Conservatism and anchoring
  5. Video: Overconfidence
  6. Reading: Lecture handouts: Heuristics-driven biases
  7. Reading: Additional heuristic-driven biases (required)
  8. Reading: Heuristics and Biases in Retirement Savings Behavior (optional)
  9. Video: Frame dependence
  10. Video: Mental accounting
  11. Reading: Behaving Badly (optional)
  12. Reading: Seven Sins of Fund Management (optional)
  13. Reading: Lecture handouts: Frame dependence
  14. Practice Quiz: Heuristic driven biases and frame dependence
  15. Video: Realistic preferences
  16. Video: Loss aversion or Prospect theory
  17. Video: Habit utility
  18. Video: Catching up with the Joneses
  19. Reading: Lecture Handouts: Preferences
  20. Reading: The Psychology and Neuroscience of Financial Decision Making
  21. Reading: Psychology of what we do with our money (optional)
  22. Video: Biases and realistic preferences
  23. Reading: Module 2: Quiz solutions

Graded: Biases and realistic preferences

WEEK 3


Inefficient markets



In this module, we review a number of puzzles related to the aggregate stock market and the cross-section of average stock returns that have been documented in the literature. We examine how the behavioral biases and tendencies discussed in the previous module might result in some of these puzzles observed in financial markets.


9 videos, 2 readings, 2 practice quizzes expand


  1. Video: Introduction
  2. Video: Equity premium puzzle
  3. Video: Volatility puzzle
  4. Video: Closed-end fund puzzle
  5. Video: Examples from Closed-End Country Funds
  6. Reading: Lecture handouts: Applications – the Aggregate Stock Market
  7. Practice Quiz: Applications – the Aggregate Stock Market
  8. Video: Long-run reversals
  9. Video: Value effect
  10. Video: Momentum
  11. Reading: Lecture handouts: Applications – The cross-section of average stock returns
  12. Practice Quiz: Applications – The cross-section of average stock returns
  13. Video: Summary

Graded: Inefficient markets and behavioral biases
Graded: Identifying trends in share prices

WEEK 4


Applications: Investor behavior



In this last brief module, we turn our attention to the behavior of individual investors and review the empirical evidence on how behavioral biases and tendencies we discussed in the previous modules affect individual investor portfolio choice and trading decisions.


6 videos, 3 readings, 1 practice quiz expand


  1. Video: Introduction
  2. Video: Failure to Diversify
  3. Video: Naïve diversification
  4. Video: Excessive trading
  5. Video: Individual investors’ buying and selling decision
  6. Reading: Lecture handouts: Investor behavior
  7. Practice Quiz: Investor Behavior
  8. Video: Summary
  9. Reading: Module 4: Quiz solutions
  10. Reading: End-of-Course Survey

Graded: Applications: Investor behavior

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