| Lunchtime Master Class Thursday 23 April Booking is required for this event . |
Recent Advances in Behavioural Finance
Professor Richard Taffler
Martin Currie Chair of Finance & Investment, University of Edinburgh Business School |
Following the success of our 2008 'Masterclasses', we are pleased to announce our third such forum.
Richard Taffler, a leading expert in behavioural finance, will demonstrate the latest developments in the study of the influence of psychology on the behaviour of financial practitioners, and the subsequent effect on markets.
|
| The Masterclass Series is for members looking to keep up-to-date with the latest developments in economic thinking and the applications of this in a business environment. Aimed at professional economists, it assumes a degree of technical knowledge. Participation can, if requested, be recognised with a certificate of attendance as part of 'continuing professional development' requirements. |
| Behavioural Finance |
| Behavioural finance is the application of cognitive psychology to the judgements of investors and financial managers. It recognises we are all subject to bias and decision errors, are loss averse and prone to regret, and are not "rational" decisions makers. By understanding these inherent cognitive processes we are in a better position to deal appropriately with their consequences. |
|
This master class will review what we know about behavioural finance and, in particular, draw out some of the implications for business economists. It will describe some important judgemental heuristics and biases and illustrate how they are manifest in market and corporate behaviour.
Discussion will focus around such issues as overconfidence among investors and corporate managers, bias in sell-side analyst judgements, why the market under reacts to bad news, the marketing of financial products, why acquisitions are typically negative NPV investments and the continuing key role of the interview in financial decision processes despite being so notoriously fallible. |
| Recent research evidence will be drawn on with practical illustrations and, importantly, participants will be encouraged to reflect on and review application to their own work environments. |
| Richard Taffler |
Professor Richard Taffler, Martin Currie Chair of Finance & Investment at The University of Edinburgh Business School, has published over a hundred academic and professional papers and books and is frequently quoted in the media. Richard is particularly well known for his development of UK Z-score models for the prediction of company bankruptcy and recovery, which are widely used in investment and credit analysis, and his expertise in behavioural finance.
He is also currently developing the new and very practical paradigm of emotional finance to complement traditional and behavioural perspectives. This seeks to understand the unconscious fears, drives and fantasies that impact on investor and market behaviour, and the key roles played by uncertainty and concomitant anxiety in determining investor decisions.
Richard teaches in the areas of behavioural finance and investor psychology, securities analysis and portfolio management, and corporate finance, and particularly enjoys executive development and engagement with practitioners, as well as supervising his PhD students. He also consults with major investment houses, international banks and other financial services organisations. |
Richard's current research focuses in a number of areas. He is especially interested in the practical application of behavioural finance theories to real world investment issues and the associated identification and exploitation of stock market anomalies. He is the joint author of three new such anomalies associated with the market's inability to price bad news events appropriately. Another area of research interest is the role of the sell-side analyst in capital markets and whether their activities have real value for investors.
Other current work explores the market value of investor relations activity and fund manager investment strategies. Much of this research is motivated by Richard's belief that the practical benefits from drawing on the insights psychologists can provide to finance practitioners is inadequately recognised in the capital markets. |
| Recent published (in international journals) and working papers focus on investment analyst bias, the market's under reaction to bad news and associated investment anomalies, market mispricing of financial and bankruptcy risk and accounting reports, whether investor relations activity adds market value, the role of CEO narcissism in M&A deals in explaining subsequence firm underperformance, whether good management is also good for shareholder returns and financial distress risk. He is currently engaged in writing two books on emotional finance jointly with David Tuckett, a leading professor of psychoanalysis at UCL |