Analyze Risk and Investor Decision-Making

By the end of this course, learners will be able to analyze investor behavior, compare behavioral and traditional finance, evaluate risk preferences, and explain financial decision-making under uncertainty. Learners will develop a strong foundation in utility theory, probability, rationality, bounded rationality, and prospect theory. The course begins by examining how behavioral finance expands traditional financial models by incorporating psychological influences on investor choices. Learners will explore utility theory and its assumptions, understand the role of probability and Bayesian reasoning, and assess the rational economic man framework. They will then investigate how risk aversion, individual preferences, reference points, and the isolation effect influence financial decisions. Completing this course will help learners interpret why investors respond differently to similar risks and identify situations where actual behavior differs from rational predictions. Its unique strength lies in combining classical decision theories with behavioral explanations, enabling learners to build a structured understanding of investor psychology before applying it to markets, portfolios, and advisory situations.