FINANCIAL KNOWLEDGE AND IRRATIONALITY IN THE INDIVIDUAL INVESTMENT DECISIONS

José L. B. Fernandes, Universidade de Brasília, Brazil
Rayssa G. Rosa, Universidade de Brasília, Brazil

Published in

JOURNAL OF INTERNATIONAL FINANCE STUDIES
Volume 19, Issue 1, p5-10, March 2019

ABSTRACT

This paper analyses how financial knowledge influences irrationality in the individual financial decisions. Following the prospect theory, we considered two bias to identify the irrationality level: risk preference asymmetry (APR) and the weighted probability (PW). Considering a sample of undergraduate students, we found evidence that financial knowledge doesn’‘t rationalize individual financial decisions (emotional bias).

Keywords

Behavioral Finance. Financial Knowledge. Financial Literacy.


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