Behavioral Finance - IEEastern Europe. He started his career in the early 90’s at Mercapital, then...
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EXECUTIVE EDUCATION 21 ST - 22 ND JUNE, 2018 MADRID, SPAIN Behavioral Finance: Debiasing Investment Decision Making
Transcript of Behavioral Finance - IEEastern Europe. He started his career in the early 90’s at Mercapital, then...
EXECUTIVE EDUCATION21ST - 22ND JUNE, 2018
MADRID, SPAIN
Behavioral Finance: Debiasing Investment
Decision Making
Index
IE Excellence 4
About IE 5
IE global presence 6
International recognition 8
Overview 10
Program objectives 11
Who is this program for? 12
What can you expect? 14
Benefits 14
Content 15
Faculty 16
Contact 18
BEHAVIORAL FINANCE: Debiasing Investment Decision Making / 2018/ 4
IE shapes leaders with a global vision, an entrepreneurial mindset and a humanistic approach. It drives innovation and change in organizations and provides a learning environment where
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AboutIEFocused on
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InternationalrecognitionIE and its schools are recognized by the international press as being among the top international schools.
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AMBA ASSOCIATION OF MBA’SAACSB INTERNATIONAL ASSOCIATION
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Economic agents often behave irrationally: when faced with decisions
involving evaluations of risk and return they can yield to emotional
impulses and biases. By applying insights from cognitive psychology,
the field of Behavioral Finance aims to understand how and when
financial decisions of individuals are influenced by factors that are not
strictly rational and often unconscious, which may lead to sub-optimal
outcomes.
The increasing relevance of this approach has been vindicated by the
award of the Nobel Prize in Economics to Daniel Kahneman in 2002,
one of the founders of Behavioral Economics, and to Richard H. Thaler
in 2017, father of Behavioral Finance.
In parallel, management experts are stressing the importance of
identifying and avoiding the biases that influence business decisions in
boardrooms, investment committees, and negotiation tables (a process
known as debiasing).
Behavioral Finance analyzes the systematic cognitive factors that
explain most of the irrational behaviors of financial agents, thus
providing valuable insights that can enable professionals to make better
investment decisions, and to benefit from the errors made by others. The
main underlying assumption of Behavioral Finance is that our brains
often process data using shortcuts and emotional filters. As a result,
financial decision makers deal with the uncertainties associated with the
future in an imperfect way.
OverviewIMPROVE YOUR INVESTMENT DECISION MAKING SKILLS BY APPLYING FRONT LINE INSIGHTS FROM COGNITIVE PSYCHOLOGY
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In this program, participants will learn to identify all the biases,
psychological traps and shortcuts that may prevent them, and
others, from making the best use of their financial knowledge,
especially when decisions are made under pressure, information
is limited and risk is hard to assess. For example, identification of
such biases will help understand the reasons that can make prices
of assets depart from their fundamental values, thus creating
exploitable investment opportunities.
You will audit your own decision-making framework to identify
possible biases that you were unaware of and learn to manage
them to enhance your performance.
After this program, you will feel more confident to tackle uncertainty
and risk in your financial decisions and negotiations.
Program objectives
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Who is this program for?
This program is designed for experienced finance professionals
working in areas such as:
• M&A
• Corporate finance
• Investment banking
• Private equity
• Venture capital
• Financial management (CFO, treasurer)
• Senior management (CEO, Board member, cIo, chief risk
manager, chief strategist)
• Asset management
• Family and multi-family offices
• Research and analysis
• Trading
• Risk management
• Insurance
This program assumes knowledge of the fundamentals of
finance theory and of the operation of capital markets.
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What can you expect?
This program is designed to help experienced finance professio-
nals to:
• Learn why and how our brain often leads us to the wrong
financial decisions
• Understand the mental shortcuts we use in our everyday
life to help identify when they can cloud our professional
judgments, or when they may be a useful tool to make snap
decisions
• Identify the main biases that may lead into predictable invest-
ment errors
• Recognize the emotions that distort our perception of risk
and return, and how to redress them
• Avoid “groupthink” when collaborating with others
• Identify market inefficiencies and investment opportunities
created by behavioral biases
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Benefits
FOR THE PARTICIPANT• Make wiser investment decisions by identifying and
managing cognitive biases and psychological traps that may
lead to miscalculations of risks and returns.
• Increase your confidence in your decision-making and
negotiating capacities.
• Be more aware of your own biases and learn how to be
systematic and self-aware in your analysis and decision-
making processes.
FOR THE COMPANY• Reduce risk and increase returns by learning how to introduce
systematic debiasing in corporate and financial decisions
processes.
• Avoid groupthink and the distortions it can cause.
• Identify the investment opportunities that behavioral based
market inefficiencies offer.
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Content
CLASSIC FINANCIAL MODELS
• Main limitations identified by economists of their applicability
to real life focusing on two: asymmetry of information and
conflicts of interest
• Non-financial factors that influence an investment decision
COMMON BIASES OR HEURISTICS
Frequent ways to simplify the process of making decisions in
conditions of uncertainty or with outcomes difficult to quantify,
and most frequent biases resulting from them:
• Representativeness
• Availability
• Anchoring
• Loss and regret aversion
• Intuitive predictions
• Mental accounting
• Frame dependence
• Confirmation
EMOTIONS AND OVERCONFIDENCE
How affective reactions play a central role in investors’ heuristic
system:
• Overconfidence
• Illusion of validity
• Illusion of understanding
• Halo effect
• Loss aversion and other findings of prospect theory
FINANCIAL MARKET IMPLICATIONS
• How to identify the reasons why asset prices often deviate
from their fundamental values
• Opportunities that behavioral based inefficiencies offer
investors
• Application to Investment firms, financial decisions, corporate
finance, and business strategy
The program contents will be reinforced through practical cases, scenarios, and hands-on exercises. Delivery will be highly interactive,
and you will be required to think, speak, and collaborate with others to help you master every technique presented. You will leave
with methods and frameworks that you can start using immediately, along with an extensive bibliography to continue to build your
knowledge.
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Faculty
Prof. Eusebio Martin has over 25 years of experience as a finance professional, during which he has
held positions of responsibility as advisor, fund manager, fund investor, lender, investee, and company
executive, in private equity firms, industrial companies and a large International Financial Institution.
He has led 26 transactions of equity and debt worth over E300m in Spain, the UK, Latin America and
Eastern Europe. He started his career in the early 90’s at Mercapital, then at the forefront of an incipient
private equity industry in Spain.
He worked for six years in London at the European Bank for Reconstruction and Development (EBRD),
where he led loans and equity investments in Russia, Kirgizstan, Kazakhstan, Ukraine, Bulgaria, Poland,
Romania and Slovakia.
On his return to Spain, he worked for four years in industry, first as a Head of Strategy of a consumer
goods company, and then as Head of M&A and Corporate Director in an animal feed producer. From
2010 until January 2015 he was Partner at N+1 Mercapital (now Alantra), the leading private equity firm
in Spain, also present in Latin America.
Currently, he is working as an independent financial advisor of mid-market companies and private
equity firms in both fundraising and investing.
A graduate in Economics from Universidad Complutense of Madrid, and MBA from INSEAD, Eusebio
Martin is an Associate Professor of Finance at the IE Business School since 2013, where he teaches
Introduction to Capital Markets, Private Equity and Behavioral Finance to post graduate students.
Eusebio’s interest in Behavioral Finance originated from his frustration with the limitations of classic
financial models in his day to day investment activity. His experience was that the sophisticated
quantitative tools learned at business school were useful to a point, but did not help him to deal with the
often-imperfect judgments and irrational behavior of human beings, including himself.
EUSEBIO MARTIN
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Contact
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IE Executive Education
Visit our website where you can also download the program brochures:
www.ie.edu/executive-education
Or contact our Admissions team:
BARBARA ZUBILLAGA
Program Manager
+34 91 568 97 58
+34 620 91 29 33
Details
REGISTRATION
You may register online by going to our website: www.ie.edu/
bhf, proceeding to the program’s webpage, and clicking on the
“Register now” button on the right-hand side.
Once your registration is received, you will be contacted by IE staff
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SPECIAL CONCESSIONS
Concessions are available for IE alumni, groups of executives
attending from the same organization, participants registering for
more than one program, early-bird inscriptions, and other cases.
FEES
The program investment is 2,800€ which covers tuition, course
materials, and all coffee breaks and lunches during the program.
FINANCIAL AID
IE Business School may be able to help you to finance the pro-
gram through our financial aid department. To explore opportu-
nities available to you please contact [email protected]
More information on financial aid at IE is available
www.ie.edu/executive-education/financial-aid
Partial scholarships are also available for exceptional candidates.
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