We may earn an affiliate commission when you visit our partners.

Biases and Portfolio Selection

Investors tend to be their own worst enemies. In this third course, you will learn how to capitalize on understanding behavioral biases and irrational behavior in financial markets. You will start by learning about the various behavioral biases – mistakes that investors make and understand their reasons. You will learn how to recognize your own mistakes as well as others’ and understand how these mistakes can affect investment decisions and financial markets. You will also explore how different preferences and investment horizons impact the optimal asset allocation choice.

After this course, you will be more effective in overcoming biases to do the wrong things at the wrong times and tailoring an investment strategy that is best suited on your or your client’s profile and investment needs.

Enroll now

Or subscribe to Coursera Plus

And get unlimited access to Coursera

What's inside

Syllabus

Efficient markets hypothesis and limits of arbitrage

This module introduces the third course in the Investment and Portfolio Management Specialization. In this module, we first present the efficient market hypothesis (EMH) – another pillar idea of modern finance. You will learn about its rationale as well as the empirical evidence that supports and challenges the predictions of the EMH such as anomalies. Finally, we will consider why smart money may sometimes fail to exploit away anomalies in financial markets.

Biases and realistic preferences

In this module, we review the behavioral critique of market rationality. In contrast to the presumption that investors are rational, behavioral finance starts with the assumption that they are not. We will examine some of the information-processing and behavioral biases uncovered by psychologists in several contexts. In addition, we will consider alternative, more realistic ways of describing investor preferences.

Inefficient markets

In this module, we review a number of puzzles related to the aggregate stock market and the cross-section of average stock returns that have been documented in the literature. We examine how the behavioral biases and tendencies discussed in the previous module might result in some of these puzzles observed in financial markets.

Applications: Investor behavior

In this last brief module, we turn our attention to the behavior of individual investors and review the empirical evidence on how behavioral biases and tendencies we discussed in the previous modules affect individual investor portfolio choice and trading decisions.

Good to know

Know what's good

, what to watch for

, and possible dealbreakers

Ideal for investors and students of behavioral finance who want to develop strategies that capitalize on biases and irrational behavior in markets

Led by Arzu Ozoguz, an instructor with expertise in behavioral finance and investment management

Provides a comprehensive understanding of behavioral biases and their impact on investment decisions

Examines the efficient market hypothesis and its limitations, offering a critical perspective on market rationality

Emphasizes the importance of overcoming biases to make sound investment choices

Requires no prerequisite knowledge, making it suitable for beginners and those with varying backgrounds in finance

Save this course

Save Biases and Portfolio Selection to your list so you can find it easily later:

Save

Reviews summary

Well received portfolio course

According to students, this course on biases and portfolio selection is of high quality. Learners say that the course material is thorough and makes the subject matter interesting. One student notes that it is their favourite course

Activities

Be better prepared before your course. Deepen your understanding during and after it. Supplement your coursework and achieve mastery of the topics covered in Biases and Portfolio Selection with these activities:

Review efficient markets hypothesis

Show steps

Revisiting the efficient markets hypothesis will help build a strong foundation for understanding the course material.

Show steps

Read the course syllabus and skim the first module.
Review your notes or textbooks from previous finance courses.
Complete any assigned readings or online quizzes on the efficient markets hypothesis.

Organize and review course materials

Show steps

Organizing and reviewing course materials will help you stay on track and improve your understanding of the course content.

Show steps

Download and organize lecture slides, notes, and assignments.
Review the materials regularly to reinforce your learning.
Create a study schedule and stick to it.

Create a mind map of behavioral biases

Show steps

Creating a mind map of behavioral biases will help you visualize and understand the different types of biases discussed in the course.

Browse courses on Behavioral Biases

Show steps

Brainstorm a list of behavioral biases discussed in the course.
Organize the biases into categories or groups.
Use a mind mapping tool or software to create a visual representation of the biases and their relationships.

Five other activities

Expand to see all activities and additional details

Show all eight activities

Solve practice problems on behavioral finance

Show steps

Solving practice problems will help you apply the concepts of behavioral finance to real-world scenarios.

Browse courses on Behavioral Finance

Show steps

Find online practice problems or quizzes on behavioral finance.
Work through the problems and check your answers.
Review the solutions and identify areas where you need to improve.

Discuss case studies of investment biases

Show steps

Discussing case studies of investment biases with peers will allow you to learn from others' experiences and perspectives.

Browse courses on Case Studies

Show steps

Find a study group or online forum where you can discuss investment biases.
Present a case study of an investment bias to the group.
Lead a discussion on the causes, consequences, and potential solutions related to the bias.

Develop an investment strategy based on behavioral biases

Show steps

Developing an investment strategy that takes into account behavioral biases will help you make more informed and rational investment decisions.

Browse courses on Investment Strategy

Show steps

Research and identify your own behavioral biases.
Develop an investment strategy that minimizes the impact of these biases.
Create a written document or presentation outlining your investment strategy.

Review 'Thinking, Fast and Slow' by Daniel Kahneman

Show steps

This book provides insights into the two systems of thinking that influence our behavior, which can help you understand and overcome behavioral biases in investing.

View Noise: A Flaw in Human Judgment on Amazon

Show steps

Read the book and take notes on the key concepts.
Identify examples of how these concepts apply to investing.
Discuss the book with a friend or colleague.

Attend a workshop on behavioral finance

Show steps

Attending a workshop on behavioral finance will allow you to learn from experts and network with other professionals in the field.

Browse courses on Behavioral Finance

Show steps

Research and find a relevant workshop.
Register for the workshop.
Attend the workshop and take notes.

Career center

Learners who complete Biases and Portfolio Selection will develop knowledge and skills that may be useful to these careers:

Behavioral Economist

A Behavioral Economist studies how psychological factors influence economic decisions. This course may be useful as it provides a strong foundation in behavioral finance, which is a closely related field. This knowledge can help Behavioral Economists better understand how people make economic decisions and develop policies that are more effective.

See salaries and explore the career path for Behavioral Economist

Professor

A Professor teaches and conducts research in a specific academic discipline. This course may be useful as it provides a strong foundation in behavioral finance, which is a growing field. This knowledge can help Professors stay up-to-date on the latest research and teach their students about this important topic.

See salaries and explore the career path for Professor

Investment Analyst

An Investment Analyst researches and studies financial data, economic conditions, and business trends. They provide recommendations and advice to clients, and may manage portfolios. This course may be useful as it provides a strong foundation in behavioral finance, which can help Investment Analysts understand how investors make decisions and how this can affect financial markets. This knowledge can help Investment Analysts make better investment recommendations and achieve better results for their clients.

See salaries and explore the career path for Investment Analyst

Portfolio Manager

A Portfolio Manager manages investment portfolios for individuals and institutions. This course may be useful as it provides a strong foundation in behavioral finance, which can help Portfolio Managers understand how investors make decisions and how this can affect financial markets. This knowledge can help Portfolio Managers make better investment decisions and achieve better results for their clients.

See salaries and explore the career path for Portfolio Manager

Risk Manager

A Risk Manager identifies and assesses risks, and develops and implements strategies to mitigate those risks. This course may be useful as it provides a strong foundation in behavioral finance, which can help Risk Managers understand how investors make decisions and how this can affect financial markets. This knowledge can help Risk Managers make better risk management decisions and protect their organizations from financial losses.

See salaries and explore the career path for Risk Manager

Investment Manager

An Investment Manager oversees and manages investment portfolios for individuals and institutions. This course may be helpful as it provides a strong foundation in behavioral finance, which can help Investment Managers understand how investors make decisions and how this can affect financial markets. This knowledge can help Investment Managers make better investment decisions and achieve better results for their clients.

See salaries and explore the career path for Investment Manager

Financial Planner

A Financial Planner helps individuals and families plan for their financial future. This course may be useful as it provides a foundation in behavioral finance, which can help Financial Planners understand how investors make decisions and how this can affect financial markets. This knowledge can help Financial Planners better serve their clients and tailor financial plans that are more likely to meet their clients' needs.

See salaries and explore the career path for Financial Planner

Data Scientist

A Data Scientist analyzes and interprets data to identify patterns and trends. This course may be useful as it provides a foundation in behavioral finance, which can help Data Scientists better understand how investors make decisions and how this can affect financial markets. This knowledge can help Data Scientists develop more effective data-driven models and algorithms.

See salaries and explore the career path for Data Scientist

Financial Advisor

A Financial Advisor helps clients make informed financial decisions, such as how to save for retirement or invest for the future. This course may be helpful to Financial Advisors as it provides a deeper understanding of behavioral biases and how they can impact investment decisions. This knowledge can help Advisors better serve their clients and tailor investment strategies that are more likely to meet their clients' needs.

See salaries and explore the career path for Financial Advisor

Actuary

An Actuary uses mathematical and statistical techniques to assess risk and uncertainty. This course may be useful as it provides a foundation in behavioral finance, which can help Actuaries better understand how investors make decisions and how this can affect financial markets. This knowledge can help Actuaries make better risk assessments and develop more effective strategies for mitigating risk.

See salaries and explore the career path for Actuary

Financial Analyst

A Financial Analyst researches and studies financial data, economic conditions, and business trends. They provide recommendations and advice to clients, and may manage portfolios. This course may be useful as it provides a foundation in behavioral finance, which can help Financial Analysts understand how investors make decisions and how this can affect financial markets.

See salaries and explore the career path for Financial Analyst

Financial Consultant

A Financial Consultant provides advice to individuals and businesses on financial matters, such as investing, saving, and retirement planning. This course may be useful as it provides a foundation in behavioral finance, which can help Financial Consultants understand how investors make decisions and how this can affect financial markets. This knowledge can help Financial Consultants provide better advice to their clients.

See salaries and explore the career path for Financial Consultant

Compliance Officer

A Compliance Officer ensures that a company complies with all applicable laws and regulations. This course may be useful as it provides a foundation in behavioral finance, which can help Compliance Officers understand how investors make decisions and how this can affect financial markets. This knowledge can help Compliance Officers better understand the risks associated with financial markets and ensure that their companies are compliant with all regulations.

See salaries and explore the career path for Compliance Officer

Economist

An Economist analyzes and interprets data to understand the economy and make predictions about its future performance. This course may be useful as it provides a foundation in behavioral finance, which can help Economists understand how investors make decisions and how this can affect financial markets.

See salaries and explore the career path for Economist

Analyst

An Analyst researches and studies financial data, economic conditions, and business trends. They provide recommendations and advice to clients, and may manage portfolios. This course may be useful as it provides a foundation in behavioral finance, which can help Analysts understand how investors make decisions and how this can affect financial markets.

See salaries and explore the career path for Analyst

Reading list

We've selected 17 books that we think will supplement your learning. Use these to develop background knowledge, enrich your coursework, and gain a deeper understanding of the topics covered in Biases and Portfolio Selection.

Behavioral Corporate Finance

Save

A comprehensive and scholarly overview of behavioral finance, this book valuable resource for academics and researchers in the field. It covers the latest research on behavioral biases and their implications for investors.

Biases and Portfolio Selection

What's inside

Syllabus

Good to know

Save this course

Reviews summary

Well received portfolio course

Activities

Career center

Reading list

Share

Similar courses