Home bias

Do you prefer to bet on the increase of the Dow Jones or the CAC40 on the first of next September? Do you prefer to bet on the decrease of the Dow Jones or the CAC40 on the first of next September? These questions have been asked in many experiments on behavioral finance to MBA…

HOW DO YOU MAKE DECISION UNDER RISK ?

Behavioral finance uses psychological insights to inform financial theory. Behavioral finance holds that we do not behave like the rational and self-interested agent of economic theories. Homo Sapiens is not Homo Economicus. We have emotions. We are influenced by the others. We have cognitive bias. This papers aims to help you better understand how these…

Ambiguity averse?

Author: Tiphaine Saltini As a CFO, we can choose to invest in between three options: We get €500.000 We invest in a stock with a 50% of chance of earning €1M or nothing We invest in an industrial project on which we have little information except that we can earn €1M, if it is successful or…