Behavioural Finance — DU B.A. (Hons.) Business Economics (BBE) Previous Year Question Papers

Type of the Paper Behavioural Finance Discip.line Specific Elective There are Five (5) questions in total, with internal choice for each question. Parts of the questions to be attempted together. Ql a) "Neoclassical economics assumes rational, utility maximising individuals operating under perfect information." Critically examine this statement and discuss its relevance in financial decision making. (9) b) Critically evaluate the relevance of Modern Portfolio Theory in present financial world. (9) OR a) "Market prices fully reflect all the available infomation for a stock in the market." Critically analyze this statement. (9) b) Explain Expected Utility Theory with suitable examples. (9) Q2. a) Explain the size effect and the value effect as stock market anomalies. How do these challenge the Efficient Market Hypothesis? (9) b) Discuss the Global Financial Crisis of 2008 from a behavioural finance perspective. What role did the behavioural biases play in the build-up and collapse? (9) OR a) Discuss the pioneering contributions of Nobel Laureates Daniel Kahneman and Amos Tversky to the emergence and development ofBehavioural Finance as a discipline. (9) b) Explain the Dot-com Bubble as an example of a speculative market bubble. What were the key behavioural drivers responsible for its formation and eventual collapse? (9) OR a) Explain how reliance on heuristics can lead to systematic errors injudgement. b) Explain prospect Theory with suitable examples. (9) (9) Q4 a) How do framing effects and advertising influence investor decision-making in financial markets? (9) OR a) Discuss the economic characteristics of financial contracts under conditions of risk neutrality and risk aversion. (9) b) How do herd behaviour and overconfidence in the mutual fund industry affect fund flows and asset prices? (9) Q5. Write short notes on any TWO of the following: (2 × 9 = 18 Marks) (i) Familiarity Bias (ii) Gambler's Fallacy (iii) Signalling in Financial Markets (iv) Moral Hazard in Financial Contracts