Behavioural Finance

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Behavioural Finance' builds on the knowledge and skills that students have already gained on an introductory finance or corporate finance course. The primary focus of the book is on how behavioural approaches extend what students already know. At each stage the theory is developed by application to the FTSE 100 companies and their valuation and strategy. This approach helps the reader understand how behavioural models can be applied to everyday problems faced by practitioners at both a market and individual company level. The book develops simple formal expositions of existing attempts to model the impact of behavioural bias on investor/managers' decisions. Where possible this is done grounding the discussion in practical, numerical, examples from the financial press and business life. About The Author William Forbes is a Professor of Accounting and Finance in the Business School at Loughborough University, UK. He has previously held positions at University of Glasgow, University of Manchester, University College of North Wales in Bangor, Staffordshire Polytechnic and University of Exeter. He has published many articles in a variety of academic journals and his current research interests include: searching for intangible value in Internet stocks, corporate restructuring and company performance in the UK, and analyst opinion and social pressure in the UK security market. Table Of Contents Preface Acknowledgements Introduction Part I: Foundations Financial Decision Making Discounting Learning Bubbles Part II: Asset Pricing Noise Traders Overconfidence and Optimism Asset Pricing under Prospect Theory Overreaction and/or Underreaction Momentum Herding Insider Trading Equity Premium Puzzle Part III: Corporate Finance Incorporation The Market for Information, Noise and Deception Dividends Entrepreneurship Part IV: The professions Analysts' Conflicts of Interest Accounting Reform Appendix A: Mark-to-Market Accounting at Enron -- A Case Study Appendix B: Solving for Price in Terms of Abnormal Earnings and Non-Accounting Information only (Equation (19.7) Questions Notes References 20 Conclusion Index