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Determinants of Risk Taking Behavior: The role of Risk Attitudes, Risk Perceptions and Beliefs

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Author Info
Nosic, Alen () (Sonderforschungsbereich 504)
Weber, Martin () (Lehrstuhl für ABWL, Finanzwirtschaft, insb. Bankbetriebslehre)
Abstract

Our study analyzes determinants of investors' risk taking behavior. We find that investors' risk taking behavior, i.e. portfolio choices can be predicted using risk attitudes, risk perceptions and belief measures such as optimism and overconfidence. However, the predictive power of these determinants heavily depends on the domain in which it was elicited. More specifically, risk attitudes, risk perceptions and beliefs only allow us to predict investors' risk taking behavior if they are elicited in an investment related context. We think that our results could also benefit practitioners who could incorporate some of the determinants we have used in their investment advisory process.

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Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 07-56.

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Length: 33 pages
Date of creation: 31 Jul 2007
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Handle: RePEc:xrs:sfbmaa:07-56

Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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  7. Renate Schubert et al., 1999. "Financial Decision-Making: Are Women Really More Risk-Averse?," American Economic Review, American Economic Association, vol. 89(2), pages 381-385, May. [Downloadable!] (restricted)
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  12. Cesarini, David & Sandewall, Orjan & Johannesson, Magnus, 2006. "Confidence interval estimation tasks and the economics of overconfidence," Journal of Economic Behavior & Organization, Elsevier, vol. 61(3), pages 453-470, November. [Downloadable!] (restricted)
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  17. Juan Dubra, 2004. "Optimism and Overconfidence in Search," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 198-218, January. [Downloadable!] (restricted)
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