How Riskily Do I Invest? The Role of Risk Attitudes, Risk Perceptions, and Overconfidence

摘要

Our study analyzes the determinants of investors' risk-taking behavior. We find that investors' risk-taking behavior is affected by their subjective risk attitude in the financial domain and by the risk and return of an investment alternative. Our results also suggest that, consistent with previous findings in the literature, the objective, or historical, return and volatility of a stock are worse predictors of risk-taking behavior than subjective risk and return measures. Moreover, we illustrate that overconfidence, or more precisely, miscalibration, has an impact on risk behavior as predicted by theoretical models. However, our results regarding the effect of various determinants on risk-taking behavior heavily depend on the content domain in which the respective determinant is elicited. We interpret this as an indication for an extended content domain specificity. In particular, with regard to the Markets of Financial Instruments Directive, we believe practitioners could improve on their investment advising process by incorporating some of the determinants that, by our argument, influence investment behavior.