In the 1970s, academic finance was largely dominated by the efficient markets theory, which suggested that markets generally behave rationally and that asset prices reflected all available information. It was a quant’s dream come true.
But by the 1990s, cracks had started to show in the theory, and focus shifted away from econometric analyses and towards a system that considered the psychological, cognitive, emotional, cultural, and social factors that drove people’s financial decisions. This was the birth of a new model of thought: behavioral finance.
A blend of psychology and business, behavioral finance has major applications in marketing, management, and policy. It also has an important intersection with sustainability: why do consumers choose one product over another, and how can they be best motivated to choose the more sustainable option?
While the efficient markets theory posits that price is the most reliable (if not the only) incentive, today’s consumers are increasingly choosing products for cultural, social, and psychological—rather than purely financial—considerations.
Behavioral finance blends social science, psychology, business, and economics. But at its core, it’s about decision-making. Where the data fails, behavioral finance steps in, and in an increasingly data-driven world, more professionals who understand behavioral finance will be needed to fill in the blanks.
To learn more about how to level up your behavioral finance understanding, read on.
Dr. Emma Rasiel is the teaching director of the Duke Financial Economics Center, as well as associate chair and professor of economics at Duke University. She received her MBA from the University of Pennsylvania and her PhD from Duke University. Prior to joining the faculty at Duke University, she was an executive director for Goldman Sachs.
Dr. Rasiel teaches courses in behavioral finance for the Duke in London study-away program, and for her online class in behavioral finance hosted in partnership with Coursera. She has also spearheaded an alumni-student mentoring program for 80 undergraduate students every year at Duke University, and she serves as a mentor for Duke’s STEM Pathways for Inclusion, Readiness, and Excellence (SPIRE).
Dr. David Laibson is the Robert I. Goldman professor of economics and a faculty dean of Lowell House at Harvard University. He earned his master’s in econometrics and mathematical economics from the London School of Economics and his PhD in economics from the Massachusetts Institute of Technology.
Dr. Laibson leads Harvard Universityʼs Foundations of Human Behavior Initiative, and his research focuses on the topic of behavioral economics, with emphasis on intertemporal choice, self-regulation, behavior change, household finance, and public finance.
Previously, he has served as the chair of the Department of Economics at Harvard University, and as a member of the Academic Research Council of the Consumer Financial Protection Bureau. Dr. Laibson is a two-time recipient of the Paul A. Samuelson Award for Outstanding Scholarly Writing on Lifelong Financial Security.
Dr. Dilip Soman is a research chair in behavioral science and economics at the Rotman School of Management at the University of Toronto. He also serves as a director of the Behavioral Economics in Action Research Center at Rotman (BEAR). He received his PhD from the University of Chicago.
Dr. Soman’s research is in the area of behavioral science, particularly as it relates to consumer wellbeing, marketing, and policy. He is the author of The Last Mile: Creating Social and Economic Value from Behavioral Insights and is the lead instructor for an edX course on behavioral economics.
The Chicago School of Professional Psychology (Master’s Degree)
The online master of arts in behavioral economics program at The Chicago School of Professional Psychology is focused on providing students with psychology-focused education of business applications.
Designed as an alternative to MBA programs, the curriculum integrates elements of economics, financial literacy, public policy, and consumer psychology. Courses include topics such as brain and behavior; consumer motivation; and choice architecture. The program culminates in a capstone project, which includes 30 hours of fieldwork to capture data for a journal article submission that proposes a psychologically-based solution to a socioeconomic problem.
Creighton University – Heider College of Business (Certificate)
Creighton University’s Heider College of Business offers an online graduate certificate program in financial psychology and behavioral finance. Designed for financial planners, financial advisors, and other working professionals, the program focuses on the psychology of financial decision-making through a business lens.
The 15-credit program consists of five classes: introduction to financial psychology; applied behavioral finance; personal financial psychology; the psychology of family finances; and financial communication and client interviewing. Credits earned through this certificate program may also be applied to Creighton’s MBA program.
University of California, Los Angeles
UCLA Extension offers an online course in behavioral finance. The 11-week course covers the theory and practice of behavioral finance, focusing on financial scams, bubbles, and the biases that drive humans’ financial behavior.
For a class that’s meant to act as a broad introduction, the syllabus is satisfyingly deep: optional readings call in behavioral finance thought leaders like Robert Shiller, Nicholas Barberis, and Richard Thaler. By the end of the course, students will understand the cognitive limitations people face in financial and economic decisions, understand how to deal with those limitations, and also understand the impact of those limitations on the financial system.
Harvard Business School hosts an online course in behavioral economics as part of its executive education offerings. Through dynamic faculty presentations, case studies, and simulation exercises, participants will learn how decision-making environments can influence outcomes.
Designed for executives with at least ten years of experience, the program also teaches participants how to design and test choice architecture that helps managers make better decisions, create greater value for customers, and improve business outcomes. The program also includes behavioral task force sessions, where participants discuss and generate solutions for their own organizational challenges.
University of California, San Diego
UCSD Extension offers an online course in behavioral economics that teaches students how to apply behavioral economics principles to a business context. The course focuses on choice architecture: shaping customers’ decisions by shaping the environments where those decisions are made.
Participants will learn how to create compelling value propositions, deploy effective user research and A/B testing, and launch more effective marketing and pricing strategies. The course is meant for designers, marketers, and product managers, but anyone interested in behavioral economics and consumer psychology may apply.
Duke University (Coursera)
Duke University’s online behavioral finance course, offered through Coursera, is intended to guide participants toward better financial choices.
As a broad overview of the subject, the course starts by examining the underlying theories behind how people should behave when approaching financial decisions, and contrasts those with how people actually do behave. It then progresses to the ways in which the mind distorts probabilities and succumbs to biases that result in predictable errors. In the final week, the course covers how one can best adapt to those biases, and overcome them.
University of Toronto (edX)
The University of Toronto offers an online course on Behavioral Economics in Action, hosted through edX. First developed in 2013, the course provides a fundamental understanding of behavioral economics, and has been regularly updated to include the latest research findings. Participants will learn how to explain and interpret the principles underlying economic decision-making, and design tools to help people make better economic decisions.
The course is rich with guest speakers, a list of whom includes professors from Stanford University, Boston University, and the University of Chicago.
Massachusetts Institute of Technology (edX)
In collaboration with edX, MIT is offering an online course in adaptive markets that explores financial market dynamics and human behavior. In the course, MIT finance professor Andrew W. Lo outlines the adaptive markets hypothesis, which accounts for both rationality and irrationality in financial markets.
Drawing on evolutionary biology, psychological processes, and neuroscientific study, the course prepares participants to apply a newer, more adaptive framework to tackling market challenges. Learning modules cover topics such as behavioral biases, the neuroscience of decision-making, ethics and adaptive markets, and the future of finance.