The Psychology of Finance and Investment Decisions

Overview
Objectives & Outline
Methodology
Participant Profile
Trainer

Overview

Programme Details
Date
23 October 2023
Time
9:00 AM – 5:00 PM
Venue
Asian Banking School
HRDC PROG NO
10001155965
“The investor’s chief problem - and even his worst enemy - is likely to be himself.”
Benjamin Graham, 20th-century American economist and famous value investor
Behavioural finance studies the biases and influences that affect the financial behaviours of investors and financial practitioners. It recognises that our abilities to make difficult and complex financial decisions are limited due to the biases and errors of judgement to which humans are susceptible. Being aware of the principles of behavioural finance can help investors check their perceptions against facts.

In this one-day programme, you will learn about the wide range of biases in decision making and information processing errors affecting judgments in finance. It examines cognitive biases, discusses the impact of biases on financial decision-making and also explores the behaviour of investors, fund managers and corporate decision makers. Understanding the different types of biases can be extremely valuable in studying and managing better market outcomes. Advisors who understand the psychological or emotional factors that influence investors to behavioural biases can differentiate their services and better serve their clients.
Learning Level
Intermediate
Programme Fees*
AICB MEMBER
MYR
1,700
/ PAX
NON-MEMBER
MYR
2,000
/ PAX
*Subject to 6% Service Tax
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Objectives & Outline
LEARNING OBJECTIVES
By the end of the programme, participants will be able to:
Describe what is behavioural finance and how it impacts trading and financial markets
Identify common self-deception biases, their causes and how to prevent them
Examine cognitive and emotional biases and analyse social factors that distort decision-making and how it impacts outcomes in financial markets
PROGRAMME OUTLINE
Introduction
Behavioural finance and decision-making biases: how psychological influences can affect market outcomes
Reflective vs reflexive approaches to decision making
Heuristics and mental short-cuts: make decision-making simpler and faster through shortcuts and good-enough calculations but it can also be prone to bias and errors in judgment
Why investors are often irrational: the cyclical investment process is ladden with psychological pitfalls. Only by avoiding inherent behavioral biases can investors hope to reach impartial decisions

Case Study
Traditional Finance vs Behavioural Finance - how investors’ “humanness” can lead them to make sub-optimal financial decisions they would not make if they were entirely rational as traditional finance theory supposes them to be

Self-deception Biases
Self-deception can severely limit the way we learn. When we mistakenly think we know more than we actually do, we tend to miss information that we need to make an informed decision. It is important to learn how self-deception biases impact decision making in finance and trading
Overconfidence bias: overconfidence is the driving force behind the irrational exuberance that can cause a market to crash. People who feel more financially secure than they actually are may spend too much or not save enough. Or they may be overactive traders who believe they can time their investment decisions to beat the market but end-up doing the opposite
Illusion of knowledge and control: why people think they can control random and uncontrollable events and why online traders tend to trade more frequently than they should
How to guard against self-deception biases

Case Study
The trouble with confidence (according to Daniel Kahneman - the "Father" of Behavioural Finance)

Cognitive Biases
Hindsight bias: regrets and why this leads to investors unknowingly making poor decisions going forward
Confirmation bias: why investors often do not always behave rationally and why this supports argument that the market behaves inefficiently
Representative bias: tendency of decision-makers to make decisions based on stereotypes, to see patterns where perhaps none exist
Anchoring bias: people rely too much on pre-existing information or the first information they find. They anchor their decision on mental reference points
How to guard against cognitive biases

Case Study
How cognitive biases can impact investment decisions and what can be done to control this?
How to improve your daily decision making: top cognitive biases to avoid?

Emotional Biases
Overview of emotional biases
The narrative fallacy: we love stories and we let our preference for a good story cloud the facts and our ability to make informed decisions
Loss aversion and prospect theory
How to guard against emotional biases: looking towards logic rather than emotion in investment decisions

Case Study
Overcoming emotional biases to have a successful investing experience
Theranos and Elizabeth Holmes - how everyone was fooled by narrative

Social Biases
Herding bias: many investors often follow what they perceive other investors are doing rather than make decisions based on their own analysis
Impact of social influence on investor’s trading behaviour, for example sell-offs and rallies
Guarding against social and herding biases

Case Study:
Herd mentality in the financial markets
How to break from the crowd and be a successful investor

Conclusion: be aware of biases that affect investment decisions

Exercise and discussion: How to overcome “investor irrationality?”
Methodology

Lecture, case studies, exercises and discussions
Participant Profile

Investors, fund managers, traders and anyone interested in understanding behavioural finance and how it affects the markets and corporate decision making
Trainer

Cheah Wee Leong
Cheah Wee Leong is the Director of Investment Banking Training at the Asian Banking School and has more than 25 years of experience working in the banking industry with local and foreign banks in various roles and capacities. A seasoned professional, Wee Leong brings with him broad experience as a former banker and management consultant.

Wee Leong started his career at Citibank in 1993 before joining US management consultancy firm Accenture in 1997. At Accenture, he was involved in managing large bank merger-integration, process re-engineering and transformation projects. He has worked in projects in various countries including Hong Kong, China, Singapore, Indonesia, Thailand, Mauritius and Saudi Arabia. In 2003, Wee Leong joined CIMB as its Head of Operational Risk Management and led the implementation of the bank’s operational risk management and Basel 2 – Operational Risk framework. Subsequently, he assumed various senior roles in Trade Finance, Regional Transaction Banking, Corporate Banking, Treasury and Markets division and Group CEO office at CIMB. His last role at CIMB was as Director, Group Strategy.
Wee Leong holds a Bachelor of Business Administration from the USA and a Master of Business Administration (with Distinction) from the Anglia Rushkin University, United Kingdom. He obtained training from Citibank Asia Pacific Banking Institute in Singapore in 1995. He is a certified Chartered Banker, Finance Accreditation Agency (FAA) Certified Training Professional and a holder of the PRINCE2 Foundation and Practitioner Certificate in Project Management.

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