How we actually behave – and at least three recent Nobel Prizes – often contradict what our college Economics professors taught us about how people are supposed to behave, in various aspects of our lives including in financial decision making. Behavioral finance combines the latest findings from psychology with the basic logic of conventional economics and finance to provide a more realistic perspective on such behavior. In behavioral finance, we examine how human psychology affects the way we behave, while paying attention to practical applications for investment management and corporate decision making.

On June 20, the Master of Science in Global Finance (MSGF) Program Office will organize a Finance Seminar featuring Professor Abhiroop Mukherjee, Associate Professor of Finance at HKUST. Professor Mukherjee will introduce behavioral finance more formally, and examine a few mistakes we make that are common to our romantic and financial lives:
 

• What is behavioral finance, and how does it differ from rational finance
• Three lessons from psychology – specifically, from Daniel Kahneman and AmosTversky’s Nobel Prize-winning Prospect Theory
        – about how we behave when it comes to love and money

1. Reference Dependence
2. Loss Aversion
3. Probability Weighting