A Risk Perception Primer : A Narrative Research Review of the Risk Perception Literature in Behavioral Accounting and Behavioral Finance

A significant topic within the behavioral finance literature is the notion of perceived risk pertaining to novice investors (i.e. individuals, finance students) and investment professionals (i.e. financial planners, security analysts). The author provides an overview of the concepts of risk, perception, and risk perception with the financial scholar in mind. There is also a presentation on the behavioral finance concepts and themes that might influence an individual's perception of risk for different types of financial services and investment products. The next section presents a discussion of the significant risk perception research in the social sciences namely from psychology. This research work from psychology (i.e., risk perception studies in risky situations and hazardous activities) is the behavioral foundation for a substantial amount of the current contributions within the behavioral accounting and behavioral finance literature. In particular, the work of the Decision Research scholars including Paul Slovic and his co-authors on risk perception studies that have crossed over from psychology to the disciplines of behavioral accounting and behavioral finance (i.e. behavioral risk characteristics from psychology that are applied within a financial/investment decision making context).Within the last section of this paper, the author reveals the first of its kind thorough review of the academic research studies on perceived risk/risk perception from the disciplines of behavioral accounting since 1975 and behavioral finance since the late 1960s. This literature review incorporates 12 works from behavioral accounting and 71 endeavors from behavioral finance. In addition, the behavioral finance literature review section also includes approximately 10 narrative research reviews from risk perception studies in behavioral economics. A major facet of this paper was to bring together all the previous studies in the risk perception literature for the purpose of conducting a study based on the academic foundation of the main themes, research approaches, and findings from this collection of studies