International Journal of Commerce and Management Research

International Journal of Commerce and Management Research






ISSN: 2455-1627


International Journal of Commerce and Management Research
International Journal of Commerce and Management Research
Vol. 5, Issue 2 (2019)

Regret aversion bias and financial risk tolerance


Dr. Chabi Gupta

Behavioural finance theories explain "why" individuals exhibit behaviours that do not maximize expected utility. Behavioural finance highlights inefficiencies, such as under- or over-reactions to information, as causes of market trends and, in extreme cases, of bubbles and crashes. Such reactions have been attributed to limited investor attention, overconfidence, over optimism, mimicry (herding instinct) and noise trading. Technical analysts consider behavioural finance to be behavioural economics' "academic cousin" and the theoretical basis for technical analysis. This research work explores how regret aversion bias, as explained by regret theory, may shape financial risk tolerance attitudes. The results suggest that gender, income and regret aversion bias help explain risk attitudes of individual investment decision making. Financial risk tolerance appears to be an elastic and changeable attitude. This research expands on the research work of Shefrin [2000], who concluded through his research that recent stock market price changes exert a strong influence on risk tolerance attitudes and behaviours. Regret Aversion bias plays an important role in determining the financial risk tolerance factor.
Pages : 99-104 | 577 Views | 211 Downloads
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