Introduction to Behavioural Finance (Brain Teaser)

Transcription

1 Introduction to Behavioural Finance (Brain Teaser)

2 COMPANY OVERVIEW PearlMutual Consulting Ltd ( PearlMutual or the Company ) is a business advisory firm Established in September 2009 by a group of consultants with over 20 years of joint work experience in leading consulting/advisory services firms. PearlMutual s head office is located in Lekki, Lagos.

3 COMPANY OVERVIEW Our Mission To help our clients turn their business challenges into business performance enablers Our Vision To be one of the leading consulting firm in Africa

4 OUR BRAND VALUES Innovation Partnership Excellence Accountability Reliability Leadership

5 OUR SERVICES

6 CAPACITY DEVELOPMENT PearlCon Training is our training division We work in alliance with other professionals in delivering quality training courses. We offer only top of the range courses at affordable costs We train staff on various topics and issues including soft and technical skills

7 SAMPLE CLIENT EXPERIENCE PearlCon Training has successfully organized training in the past. Testimonials from the participants also indicate the effectiveness of our training methodology Key members of our team have been training the staff of several reputable organizations in Nigeria for several years under the auspices of other training outfits

8 SAMPLE CLIENT EXPERIENCE

9 OUR TRAINING COURSES Management Development Asset Mgt Risk Mgt Project Mgt Finance Treasury

10 FACULTY PROFILE Olufunmi Adepoju, CFA, CRA, ACA, BSc Managing Partner Vast work experience CFA charter holder Certified Risk Analyst Training and education instructor Chartered Accountant (ACA) B.Sc. Accounting (University of Ilorin) Content developer Financial analyst Financial Planner

11 FACULTY PROFILE Tolu Akindele, CFA, M.SC., B.SC She currently works with GroFin Nig Limited Tolu is a CFA Charter holder. Offers business support in finance, operations, sales and marketing Facilitates courses on business plan writing, positioning small business to access funding Worked with EcoBank in business development and income generation

12 FACULTY PROFILE Olubunmi Abimbola Omose, FCA, B.SC She is a chartered accountant A management consultant Over twenty years work experience A seasoned trainer Core skill area includes audit, tax, and business advisory Worked with reputable organizations like Accenture, Agusto & Co, Equitorial Trust Bank, and Cornerstone Insurance

13 FACULTY PROFILE Charles Nyamali, CIMA, ACA, MSC, B.SC He is a qualified accountant An associate member of the chartered institute of management accountant He is a credit analyst A seasoned trainer Over fifteen years work experience Worked with First Bank as a senior manager in their credit risk management department Also worked with Agusto & Co as senior analyst strategic business research unit

14 TRAINING PACKAGE The participants shall receive the following items: Session Plan PowerPoint Slides / CDs Activities/videos Case Studies Workbooks Complete writing materials

15 DEFINITION OF BEHAVIOURAL FINANCE An application of psychology to finance Attempts to understand and explain observed investor and market behaviours Could be Micro Examines individual investors Macro Considers aggregate market anomalies

16 Behavioural finance DEFINITION OF BEHAVIOURAL FINANCE Does not assume that people are rational Does not assume that people consider all available information in decision making Does not assume that markets are efficient

17 WHY EMBRACE BEHAVIOURAL FINANCE? Calendar anomalies Technical anomalies Fundamental Anomalies

18 WHY EMBRACE BEHAVIOURAL FINANCE? Calendar anomaly is an irregularity identified when patterns of trading behaviour that occur at certain times of the year are considered. The January effect: Stocks in general have delivered abnormally high returns during the month of January. The turn-of the-month effect: Stocks earn higher returns on the last day and first four days of each month.

19 CATEGORIZATIONS OF BEHAVIOURAL BIASES Cognitive Errors Behavioural Biases Emotional Biases

20 COGNITIVE ERRORS Cognitive errors may be considered the result of faulty reasoning. Cognitive errors stem from: Basic statistical Information-processing Memory errors Cognitive errors are easy to correct.

21 COGNITIVE ERRORS

22 EMOTIONAL BIASES Emotional Biases may be considered to result from reasoning influenced by feelings Emotional biases may stem from impulse, intuition or arise spontaneously

23 EMOTIONAL BIASES Loss-aversion bias Overconfidence bias Self control bias Status quo bias Endowment bias

24 INVESTOR TYPES The Adventurer The Celebrity The Individualist The Guardian The Straight Arrow Investor Types

25 INVESTOR TYPES The Adventurer Hold high undiversified portfolio Confident Impulsive Take their own investment decision Don t like to take advice

26 INVESTOR TYPES The Celebrity Centre of attention Recognize their limitations Seek advice about investing

27 INVESTOR TYPES The Individualist Independent Confident Pleasant to advise Listen and process information rationally

28 INVESTOR TYPES The Guardian Cautious Concern about future Protection of assets Seek advice from perceived knowledgeable

29 The Straight Arrow INVESTOR TYPES Always Sensible Love Security Take risks with commensurate return

30 SUMMARY A practical integration of behavioural and traditional finance may lead to a better outcome than either approach used in isolation. By understanding behavioural biases, financial market participants may be able to moderate or adapt to the biases and as a result improve upon economic outcomes. Classifying investors into types is useful for providing insight and financial decision making but should be used with some caution.

31 Training Invitation For an in-depth knowledge of this topic, we hereby invite you to attend the full training: Venue: Canton Concourse, V/Island Date: 2 nd 4 th September Time: 3 days Fees: N60,000 For enquiries on registration, call or us at hope.isangediok@pearlmutual.com For additional information about us, visit our website at