Psychology is a vastly used discipline and has its own unique scope across varied fields. When it comes to a sought-after arena like Finance, you will come across many professionals who are dextrous in crunching heavy numbers, coming up with unique strategies but also possessing the unique skill of reading people and understanding their financial needs and preferences. As the digital world has entangled every domain with technology, Finance has also been complexified with new technological advancements from bitcoins to blockchain and online payments, investments and so on! Thus, the financial industry is always in need of talented professionals who can help people in efficiently facilitating financial management and investments. This specialisation is simply referred to as Behavioural Finance and aims to explore the psychology of investors and market behaviours. This blog brings a complete guide on this specialisation, courses offered, universities and career scope in Behavioural Finance!
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What is Behavioral Finance?
The primary goal of Behavioural Finance is to comprehend the factors that motivate people towards making choices regarding investments and other financial matters that can later potentially impact the whole market. In this discipline, it is an established notion that financial clients are not wholly rational and can be significantly influenced and their proclivities can suddenly witness a dramatic change. A fundamental element of Behavioural Finance is how certain biases affect the psyche of participants in the financial markets.
Behavioural Finance Biases and Examples
Behavioural Finance comes under the branch of human psychology. By observing and studying human behaviour, the subject covers various biases and fallacies humans make that affects their investments. Here are a few biases and examples under behavioural finance.
- Herd Mentality: This bias refers to when people prefer choices made by many people or people in the same boat as theirs. They believe that since everyone has made this choice, it cannot be wrong. Others feel an emotional conflict (known as “cognitive dissonance”) to go against the crowd.
- Loss Aversion: In basic words, this means people are afraid to incur loss and take risks to avoid any loss.
- Sunk Costs: People tend to continue with an investment or a behavioural pattern because they have invested considerable resources like time, money and energy. They feel the past cost and efforts will go in vain if they take a step back.
- Gambler’s Fallacy: This fallacy is caused when people see patterns when there are none. Humans often tend to impose a sense of order on things that are actually random. For example, flipping a coin and it turns up tails each time. People are probably more likely to bet the next flip of the coin will be “heads” next.
- Confirmation Bias: People often only pay close attention to information that confirms their belief and ignore information that contradicts it. This bias can lead for instance investors to be overconfident, ignoring evidence or facts that their strategies will lose money.
As a specialised area of study under the field of Finance and Psychology, Behaviour Finance courses are popular amongst students from around the world. Before applying for a course in this specialisation, take a look at the general prerequisites you must qualify:
- Applications are open to students with a background in Economics, Psychology, Finance and even Engineering.
- Mathematics taught in this course includes Statistics and Calculus, so applicants should be qualified in Mathematics in their previous academic qualifications like 10+2 or bachelor’s/master’s degree.
- If you are planning to study a degree in Behaviour Finance courses abroad, you will have to qualify language proficiency tests such as IELTS or TOEFL and most foreign universities ask for GRE or GMAT scores, with precedence usually given to GMAT.
- Including your work experience in the applications may give you some leverage over other applicants, although it is not a mandatory criterion.
Behavioural Finance Courses
As an emerging specialisation, there are a host of academic programs offered in Behavioural Finance. Below we have enlisted some of the popular undergraduate, postgraduate and doctorate courses in this discipline:
|Bachelor of Corporate Finance||Bachelor of Commerce – Behavioural Science||BSc (Hons) Money, Banking and Finance|
|BSc (Hons) Banking, Finance and Investment||Bachelor of Commerce in Management Economics and Finance (Honours)||Bachelor of Arts in Mathematical Economic Analysis|
|Bachelor of Business and Commerce – Finance and Marketing||Bachelor of Arts in Economics with Psychology (Honours)||Bachelor of Arts (BA) in Economics, Psychology and Philosophy (EPP)|
|Bachelor of Applied Finance and Bachelor of Business Analytics||Bachelor of Arts and Bachelor of Economics – Psychological Science||Bachelor of Science in International Trade and Finance|
|Bachelor of Applied Finance and Bachelor of Professional Accounting||Bachelors of Economics/ Science – Computational Science and Psychology||Bachelor of Mathematics in Mathematical Finance (Honours)|
|Bachelor of Science in Business Administration – Financial Wealth Management||Bachelors of Mathematics/Economics – Economics and Public Policy||Bachelor of Science in International Trade and Finance- Empirical Economic Analysis|
|Quantitative Finance||Investments MSc||Master of Financial Analysis|
|Master of Science in Economic Data Analytics||Master of Finance – Funds Management||Master of Behavioral and Decision Sciences|
|Master of Sciences in Consumer Sciences||Master of Commerce – Applied Finance||International Corporate Finance MSc|
|Masters in Finance/ Masters in Disruptive Innovation||Master of Finance – Corporate Finance and Investment Banking||Master of Science in Econometrics and Quantitative Economics|
|Master of Professional Studies in Applied Economics and Management – Applied Behavioral Economics and Individual Choice||Master of Science in Information Systems – Accounting and Information Systems Audit and Control||Master of Business Administration – Financial Risk Management|
|Doctor of Philosophy – Investment and Securities||Doctor of Philosophy in Resource Economics||PhD in Economics – Applied Microeconometrics|
|Doctorate of Philosophy in Management – Behavioral Decision Making||Doctor of Philosophy in Applied Economics||PhD in Economics – Macroeconomics and Finance|
|Doctor of Philosophy in Applied Economics – Consumer Behavior and Household Economics||Doctor of Philosophy in Economics – Microeconomic Theory, Behavioral Economics, Industrial Organization||Doctor of Philosophy in Business Administration – Strategy and Business Economics|
Behavioural Finance: Top Universities
It will not suffice to know only the courses without knowing the popular universities that provide Behavioural finance degrees to international students. Let’s now take a look at the list of top international choices in universities:
|University||Country||QS Rankings 2021|
|The Australian National University||Australia||31|
|The University of Queensland||Australia||46|
|University of Southampton||UK||90|
|University of Leeds||UK||91|
|University of York||UK||150|
|University of Sussex||UK||246|
|University of Canterbury||UK||270|
|University of East Anglia||UK||333|
|University of South Wales||UK||_|
Top Colleges in India
Behavioural Finance is not an independent course and is often taught under the course of MA Economics. Many universities abroad have started individual courses in behavioural finance. However, Indian many institutions are yet to include this course independently. Here are a few universities that offer graduate and postgraduate programs in the subject.
- IIM Bangalore
- IISER Bhopal
- Jawaharlal Nehru University, New Delhi
- Meghnad Desai Academy of Economics (MDAE), Mumbai
Career Prospects in Behavioural Finance
Finance is integral to any economy, so you will find huge opportunities awaiting at the end of your degree in behavioural finance. Plus, jobs in finance are always highly paid. Here are a few of the top choices.
- Financial Planners
- Financial Analyst
- Budget Analyst
- Investor Relations Associate
- Financial Actuary
- Accounts Manager
- Credit Analyst
Owing to the emerging scope of behavioural finance, the salary depends on the job position. The initial salary of a financial analyst or planner is INR 30,000. With experience and knowledge, the salary can go up to 3 Lakhs- 4 Lakhs per year. Here are a few popular job positions and their average salaries.
|Job Position||Average Salary (p.a.)|
|Accounting Manager||₹ 6.8 Lakhs.|
Here are a few behavioural finance books to help you understand the terms and concepts better.
- Predictably Irrational
- Thinking, Fast and Slow
- Behavioral Finance and Wealth Management
- Behavioral Finance: Psychology, Decision-Making, and Markets
- Behavioral Finance and Investor Types
- Advances in Behavioral Finance
Behavioural finance is essential because it helps to explain the difference between expectations of rational investor behaviour and actual behaviour.
Behavioural finance helps in studying human decision‐making behaviour we can push people into making their optimal choice
The two pillars of behavioural finance are cognitive psychology and the limits to arbitrage (when markets will be inefficient).
Behavioural finance can provide students jobs as:
Investor Relations Associate
Hope this extensive blog has helped you understand all about behavioural finance. Aspiring to study Behavioural Finance? Get in touch with our Leverage Edu counsellors and we will assist you in picking a suitable course and university and further assisting you throughout the application process to ensure that you begin your academic journey the right way! Sign up for a free career counselling session with us today!