About this course: We make thousands of decisions every day. Do I cross the road now, or wait for the oncoming truck to pass? Should I eat fries or a salad for lunch? How much should I tip the cab driver? We usually make these decisions with almost no thought, using what psychologists call “heuristics” – rules of thumb that enable us to navigate our lives. Without these mental shortcuts, we would be paralyzed by the multitude of daily choices. But in certain circumstances, these shortcuts lead to predictable errors – predictable, that is, if we know what to watch out for. Did you know, for example, that we are naturally biased towards selling investments that are doing well for us, but holding on to those that are doing poorly? Or that we often select sub-optimal insurance payment plans, and routinely purchase insurance that we don’t even need? And why do so many of us fail to enroll in our employer’s corporate retirement plans, even when the employer offers to match our contributions? Behavioral finance is the study of these and dozens of other financial decision-making errors that can be avoided, if we are familiar with the biases that cause them. In this course, we examine these predictable errors, and discover where we are most susceptible to them. This course is intended to guide participants towards better financial choices. Learn how to improve your spending, saving, and investing decisions for the future.

Who is this class for: This course is intended for anyone who has taken at least one course in economics either in high school or in college, and is interested in how our innate biases affect our financial decision-making.

Created by: Duke University

Taught by: Emma Rasiel, Associate Chair and Professor
Economics

Language	English, Subtitles: Portuguese (Brazilian)
How To Pass	Pass all graded assignments to complete the course.
User Ratings	4.3 stars Average User Rating 4.3See what learners said

Syllabus

WEEK 1

Week 1

Welcome to the course! In this first week, we'll look at the classical economic model of consumer choice, which assumes that all of the decisions that we make are sensible, or “rational.” Once we have examined the underlying theory of how people should behave (especially around financial decisions), we will move on to examine how people do behave. We will focus in particular on situations in which we are most inclined to make decisions that appear to defy rational choice axioms.

5 videos, 4 readings

Video: Welcome to Behavioral Finance
Reading: Course Overview
Video: Introduction to Classical Economics
Reading: Utility of Money
Video: Utility of Money
Reading: Omission Bias
Video: Omission Bias Case Study
Video: Expected Utility vs Prospect Theory
Reading: Answer Choice Explanations and Correct Answers for Week 1 Quiz

Graded: Week 1 Quiz

WEEK 2

Week 2

Welcome to the second week. In this session, we will discover how our minds are inclined to distort probabilities, and either underestimate or overestimate the likelihood of certain outcomes. We’ll also learn about “heuristic-driven bias”: the tendency to use rules of thumb that simplify the process of making decisions, but can also lead to predictable errors. These biases negatively affect our decision-making far more than we might expect; especially when the outcome of the decision has great significance for us.

8 videos, 6 readings

Reading: Problems with Probability
Video: Correlation and Causation Error
Reading: Probability Weighting
Video: Probability Weighting
Video: Relative Probabilities
Reading: The Availability Heuristic
Video: The Availability Heuristic
Reading: Framing
Video: Mental Accounting and Expenditures
Video: Loss Aversion
Reading: Representativeness
Reading: Overconfidence
Video: Belief Perseverance and Confirmation Bias
Video: Case Study: Belief Perseverance

Graded: Week 2 Quiz

WEEK 3

Week 3

In the final week of the course, we will see multiple examples of how mental heuristics can lead us to make predictably sub-optimal financial decisions, both individually and across the entire financial markets. We will also discuss the many ways in which you can now improve your financial decision-making because of your deeper understanding of the innate biases that have tripped you up in the past!

2 videos, 2 readings

Reading: Money Management
Video: Introduction to Financial Decision Making
Video: Benefits of Saving Early
Reading: Market Bubbles & Crashes

Graded: Week 3 Quiz

FAQs

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How It Works

Coursework

Each course is like an interactive textbook, featuring pre-recorded videos, quizzes and projects.

Help from Your Peers

Connect with thousands of other learners and debate ideas, discuss course material, and get help mastering concepts.

Certificates

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Creators

Duke University

Duke University has about 13,000 undergraduate and graduate students and a world-class faculty helping to expand the frontiers of knowledge. The university has a strong commitment to applying knowledge in service to society, both near its North Carolina campus and around the world.

Ratings and Reviews

Rated 4.3 out of 5 of 408 ratings

Please prepare better reading material and provide more mathematical insight and examples for each biases, as I think it'll be more helpful.

More clear examples and scenarios can be given for explaining each bias.

Muito útil

Generally it's a fantastic online course, which gives me so much insight to an area I have previously unaware of. Behavioral Finance is meaningful because it takes human behavior factors into account of finance models, especially psychology factor. It offers me new insight into a study of interdisciplinary subjects. Class outlines and videos are well-organized and challenging. However, I think the test questions are sometimes a little bit difficult, and test2 and test3 should have answers and analysis like test1. It will always be better to review the knowledge you learned after making some mistakes and being eager to know the causes. Generally, I love the course!