Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/335822 
Year of Publication: 
2023
Citation: 
[Journal:] Economic Themes [ISSN:] 2217-3668 [Volume:] 61 [Issue:] 4 [Year:] 2023 [Pages:] 497-513
Publisher: 
Paradigm Publishing Services, Warsaw
Abstract: 
Making financial decisions under risk and uncertainty has become part of everyday life. Traditional finance explores the objective side of risk, analysing the decisions made by perfectly rational individuals in efficient market conditions. Behavioural finance seeks to connect theory with practice by combining elements of behavioural psychology with finance. The centre of interest of this theory is an individual with limited cognitive abilities and the tendency to make rational choices. The paper presents the risk component of financial and investment decisions from behaviour finance view point. In addition to precise 'objective' measures, when expressing risk, subjective elements should be considered - investors' risk perception and risk attitudes. This paper aims to highlight the key characteristics of the subjective elements of risk to obtain a full picture of the outcomes of financial decision-making. Based on the analysis of theoretical and empirical studies, we define challenges, as well as recommendations to individual investors regarding the influence of psychological factors when making investment decisions.
Subjects: 
traditional finance
behavioural finance
risk attitude
risk perception
investment decisions
cognitive biases
emotional biases
JEL: 
G11
G14
G41
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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