Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/334325 
Year of Publication: 
2025
Citation: 
[Journal:] Agora International Journal of Economical Sciences (AIJES) [ISSN:] 2067-7669 [Volume:] 19 [Issue:] 1 [Year:] 2025 [Pages:] 114-123
Publisher: 
Agora University Press, Oradea, Romania
Abstract: 
This paper explores the multifaceted nature of risk in financial decision-making by integrating traditional finance models with insights from behavioural finance. It assesses the application of models such as the Capital Asset Pricing Model (CAPM), Weighted Average Cost of Capital (WACC), and Risk-Adjusted Discount Rates in real-world scenarios, examining how their effectiveness is influenced by psychological biases such as overconfidence, loss aversion, and herd behaviour. The study illustrates the impact of psychological and emotional factors on individual investor actions and corporate long-term capital investment decisions through a practical application example. The findings advocate for a comprehensive approach that combines computational tools with behaviorally informed human judgment, aiming to enhance risk analysis and improve financial returns for investors and managers.
Subjects: 
Risk perception
behavioural finance
capital budgeting
CAPM
WACC
investment decision-making
risk-adjusted discount rate
overconfidence
loss aversion
cognitive biases
financial strategy
Warren Buffett
case study analysis
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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