The purpose of this paper is twofold. First, we provide descriptive evidence on how investors perceive financial risk. Specifically, we identify the dimensions that investors consider when judging the risk of financial items, such as bonds and interest rate swaps. Second, we investigate whether...

This paper proposes and tests a new risk model that explains how investors perceive financial risks. The model combines conventional decision theory variables - probabilities and outcomes - with variables from psychology research by Slovic (1987). The latter includes variables such as the extent...

Psychologists have studied human behavior for over a century and, as a result, have developed a robust set of theories regarding how people behave. Most financial accounting issues deal with matters of human behavior, such as the judgments and decisions of managers, investors, analysts, and...