Avoidance of Risk, Ambiguity and Uncertainty in Investment Choices

Background and Objectives: Risk avoidance (RA), Ambiguity avoidance (AA) and uncertainty avoidance (UA) lie at the heart of finance theory and are among the key elements involving handling risk, ambiguity and uncertainty. However, there are no studies on the scales that elucidate the distinction between RA, AA and UA. Also, few studies relate to these aspects in the emerging stock market, Vietnam. The objectives of this study, therefore, develop the scales of risk avoidance, ambiguity avoidance and uncertainty avoidance and investigate the relationships between RA, AA, UA and demographics and investment choices. Materials and Methods: The mix method (qualitative and quantitative) included four phases as follows: In-depth interviews (10 investors), development of the scales of RA, AA and UA, a pilot test (50 investors) and web-based and paper-based surveys (400 investors). Results: (1) High avoidance of, ranked in descending order, was as follows: uncertainty (68% of total investors), ambiguity (42%) and risk (36%). (2) Female investors were more likely to avoid risk, ambiguity and uncertainty than male investors. (3) The more participation in investment courses, the higher avoidance of risk, ambiguity and uncertainty and the more the safer investments were chosen. (4) Investors who were prone to risk, ambiguity, uncertainty-avoiding were more likely to choose safe investments. Conclusion: The distinctive scales between RA, AA and UA have been explored. In addition, there were strong effects of RA, AA and UA on investment choices of individual investors in the emerging stock market, Vietnam