Behavioral Finance: Finance for Normal People – How Investors and Markets Behave

Learning Objectives

• To identify normal wants
• To recognize cognitive shortcuts and errors
• To identify emotional shortcuts and errors
• To recognize correct cognitive and emotional errors

Course Description

Though very simple in its perspective, finance is a very complex subject. It is normally understood as a specialized choice for the few to learn. However, with financial tools widely available to public, a simple and conscious understanding about finance is the requirements of the time for an average Joe. 

This CPE webinar for CPAs focuses not only on what finance is, but it also attempts to explore how the finance evolved in the first and further generations. The special webinar takes a specialized approach in explaining the psychological and rational behavior by the members of public. 

The first generation of behavioral finance, starting in the early 1980s, largely accepted standard finance’s notion of people’s wants as “rational” wants – mainly high expected returns and low risk. That first generation commonly described people as “irrational” - misled by cognitive and emotional errors on their way to their rational wants. 

The second generation describes people as “normal,” neither “rational” nor “irrational.” Normal people are people like you and me. Each of us has wants - hope for riches, freedom from poverty, nurturing children and families, being true to values, gaining high social status, playing games and winning, and more. 

We apply cognitive and emotional shortcuts as we pursue our wants. Sometimes, however, we are diverted from our wants by ignorance and cognitive and emotional errors. 

Cognitive shortcuts that can turn into cognitive errors include: 

• Framing, Hindsight, Confirmation, Anchoring and adjustment, Representatives, Availability, and Confidence.
• Emotional shortcuts that can turn into errors include: Fear, Hope, Anger, Sadness, Disgust, Happiness, Regret, and Pride.
• At the end, this online CPE webinar provides an explorator's perspective on how to pursue your wants, using cognitive and emotional shortcuts, while correcting cognitive and emotional errors.

Recommended for:

This online Finance CPE webinar is recommended for CPAs, CEOs, CFOs, Business owners, Finance professionals and Financial consultants 

Overview

• Normal people have normal wants, Why do some normal people buy lottery tickets?

  14 mins
• Framing the trading game as tennis against a practice wall

  20 mins
• Hindsight shortcuts and errors

  48 mins
• Availability shortcuts and errors

  62 mins
• Correcting cognitive and Emotional Errors

  129 mins
• Wants for utilitarian, expressive and emotional benefits

  152 mins