A Behavioural Economics Perspective on Risk. An Insight into Multidimensional Risk and Investors.

Abstract

This thesis aims at analysing risk attitudes and, in particular, at providing an insight into the definition of risk in the managerial and investing fields. In fact, decision theoretic conceptions of risk (classical decision theory definition of risk) do not explain completely choice behaviour and risk attitudes. A measure of risk given by the variance or the beta coefficient is not sufficient to explain risk: there are more aspects to take into consideration. Indeed, within this classical framework it is difficult to find an empirical definition of risk. The object of this thesis is to analyse risk under a behavioural economics and behavioural finance perspective. Its goal is to go beyond the definitions of risk given by classical economic theories and analyse the attitudes of investors towards risk in order to understand the categories that define the concept of risk in the mind of investors facing decisions under uncertainty. These categories all together are part of the multidimensional risk: with this research I want to provide understanding for how an investor/a manager build different categories of risk. Further investigation into the risky elements affecting decisions is therefore provided, with particular attention to familiarity and ambiguity issues.