This CPE course provides a concise overview of behavioral finance. This is a field of study that combines psychology and economics to understand and explain how people make financial decisions. It recognizes that individuals are not always rational and objective when it comes to their financial choices. Instead, they are influenced by various cognitive biases, emotions, and social factors that can impact their decision-making process. The course highlights the psychological and behavioral factors that contribute to irrational and biased money decision-making, and discusses strategies for overcoming these biases to make more rational financial choices.
Learning Objectives:
Upon successful completion of this course, you will be able to:
- Analyze the psychological and behavioral factors that contribute to irrational and biased money decision-making.
- Classify common cognitive biases that influence financial decision-making.
- Evaluate the role of mental accounting in financial decision-making.
- Distinguish the dangers of the ostrich effect in financial planning.
- Apply strategies for overcoming cognitive biases and emotions in financial decision-making.
- Assess the impact of present bias on financial planning.
- Identify the pitfalls of the sunk-cost fallacy in financial decision-making.
- Explain the role of anchoring bias in financial decision-making.
- Differentiate the impact of status quo bias on financial decision-making.
- Evaluate the dangers of the bandwagon effect in financial planning.
Topics Covered:
- What is behavioral finance
- Importance of Behavioral Finance in Investing and Accounting
- Traditional vs. Behavioral Finance
- Rationale Investors
- Efficient Markets
- Limitations of Traditional Finance
- Core Principles of Behavioral Finance
- Market, Investor and Practitioner Inefficiencies
- Checklist of Common Cognitive Biases and Emotional Pitfalls Related to Finance
- How to Apply Behavioral Finance Concepts in Real-Life Accounting Situations
- How to Promote a Culture of Objectivity and Critical Thinking
- How to Encourage Continuous Learning and Self-Awareness
Who Will Benefit/Target Audience:
This course is intended for anyone interested in improving their financial decision-making skills, including individuals, financial professionals, and business owners. It will be especially useful for those who have struggled with making irrational or biased financial choices in the past.
Prerequisite Knowledge
While no specific knowledge is required to take this course, it may be beneficial to have a basic understanding of financial concepts and terminology.
- Author: Garrett Wasny
