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Behavioral Finance: An Application of Prospect Theory to Brazilian Investors

Author

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  • Paulo Christian Morais Rodopoulos
  • Aldery Silveira Junior

Abstract

Behavioral finance has stood out as an interdisciplinary field of study that seeks to understand psychological and behavioral influences on financial decisions. The study aims to investigate the behavior and profile of investors in a financial institution, to understand the associations between their individual characteristics and investment performance. The methodology used was a case study, applying Kahneman and Tversky’s theory of perspective. Field study used primary data collected through questionnaires, which allowed to collect direct investor information, while correlation and correspondence analysis provides a better understanding of the relationships between the studied variables. The application of perspective theory has allowed to analyze how investor’s perceptions and preferences influence their financial decisions. The results revealed that investors tend to avoid losses and seek financial security, even if it implies renouncing potential gains. Associations were identified between investment performance time, family income level, academic background and value of financial investments. The study allowed an understanding of financial decision-making and insights to raise the quality of customer service by financial institutions.

Suggested Citation

  • Paulo Christian Morais Rodopoulos & Aldery Silveira Junior, 2024. "Behavioral Finance: An Application of Prospect Theory to Brazilian Investors," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 16(9), pages 1-31, September.
    • Handle: RePEc:ibn:ijefaa:v:16:y:2024:i:9:p:31
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    References listed on IDEAS

    as
    1. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    2. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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