This study investigates which of four paradigms best portrays the risk profile manifest by investors in their financial asset investment decisions. The choice of proxy for the risk preferences profile of a typical investor was defined by simulating investments in a laboratory setting. The results are analyzed using ordered logistic regression and show that people who have greater risk tolerance according to IPA, who violate prospect theory, and who have a high degree of openness to experience have the greatest probability of taking higher levels of risk in their investment decisions. With regard to the CRT, higher numbers of correct responses in this test has an inverse relationship with risk taking. Modern financial theory is based on the concept of homo economicus , adopted from neoclassical economics. This ideal, self-interested, and perfectly rational agent maximizes his utility by choosing at each point in time the best options available.
Behavioural Finance: How psychology can affect investors - MoneyWeek Videos
Personality traits and investor profile analysis: A behavioral finance study
By Dheeraj Vaidya Leave a Comment. Top Books. Top 10 Best Behavioral Finance Books — So what would be your alternatives to educate yourself in behavioral finance? There are not many. Of course, you can go for costly seminars.