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Emotions and Exposure to Risk: the Influence of Positive and Negative Emotions on Portfolio Decisions

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  • Ibrahim Filiz

Abstract

This experimental study addresses the question of whether positive and negative emotions have an influence on diversification behaviour, and it reveals that only a small part of subjects take rational decisions and always choose the optimal portfolio. In addition, the study shows that the mood of subjects has an influence on their portfolio decisions and thus also on their exposure to risk. The average risk of the portfolio - measured against the standard deviation of the returns - is lower in the treatment entitled ‘neutral’ than in the treatments entitled ‘positive’ and ‘negative’. JEL classification numbers: C91, D81, G11, G41.

Suggested Citation

  • Ibrahim Filiz, 2021. "Emotions and Exposure to Risk: the Influence of Positive and Negative Emotions on Portfolio Decisions," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 10(1), pages 1-3.
    • Handle: RePEc:spt:fininv:v:10:y:2021:i:1:f:10_1_3
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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