Essays on Investment Behaviour under Uncertainty

This thesis studies, develops, and tests theories of decision-making under uncertainty. I focus my analysis on two different situations. The first concerns situations where the decision-maker might be incapable of assigning precise probabilities to some outcomes, because she lacks information to do so. In such settings, the decision-maker is said to face ambiguity. This distinction is essential as many people exhibit ambiguity aversion and prefer choice situations with known probabilities (risk) over choice situations where probabilities are not known (ambiguity). The models that try to capture those behaviours, will be the focus of Chapter 1. The second type of problem this thesis studies concerns situations where the decision-maker has to make an investment decision after experiencing an event whose outcome is below what she expected. I specifically focus on how negative emotions stemming from such events influence people's subsequent decisions. These dynamics will be the focus of chapters 2 and 3.