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Applications of Behavioral Finance to Entrepreneurs and Venture Capitalists: Decision Making Under Risk and Uncertainty in Futures and Options Markets

In: Advances in Entrepreneurial Finance

Author

Listed:
  • Fabio Mattos

    (University of Manitoba)

  • Philip Garcia

Abstract

A key dimension of entrepreneurship is risk-taking behavior, and often it is assumed that entrepreneurs exhibit a higher tolerance for risk than non-entrepreneurs. However, empirical evidence provides mixed findings, raising the question whether entrepreneur’s judgment is influenced by emotion and heuristics which leads them to misperceive the risk in the market. Our findings support this idea. Empirical results indicate these investors generally take more risk than would be anticipated. Higher risk propensity is due to probability weighting and is also consistent with the idea that entrepreneurs and possible venture capitalists perceive risky situations more optimistically than non-entrepreneurs.

Suggested Citation

  • Fabio Mattos & Philip Garcia, 2011. "Applications of Behavioral Finance to Entrepreneurs and Venture Capitalists: Decision Making Under Risk and Uncertainty in Futures and Options Markets," Springer Books, in: Advances in Entrepreneurial Finance, chapter 0, pages 141-172, Springer.
    • Handle: RePEc:spr:sprchp:978-1-4419-7527-0_8
    DOI: 10.1007/978-1-4419-7527-0_8
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    Cited by:

    1. Xiaoli Tian & Zeshui Xu & Xinxin Wang & Jing Gu & Fawaz E. Alsaadi, 2019. "Decision Models to Find a Promising Start-Up Firm with Qualiflex under Probabilistic Linguistic Circumstance," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 18(04), pages 1379-1402, July.

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