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(Formerly FI 498P) Introduces the theories developed by research into cognitive biases, investor emotions and herd effects. Explores the applications of these theories in corporate finance and investment management and suggests approaches through which sophisticated investors can exploit the opportunities created by non-rational investors. Traditional (or standard) finance builds its theories on the presumption that assets are valued in modern financial markets through the buy-and-sell decisions of rational, profit-maximizing investors. An accumulating body of research challenges this fundamental presumption, suggesting instead that investment decisions are motivated by a complex array of non-rational psychological factors.
Units: 3 , Offered: Spring 2017