Lucarelli C., Brighetti G. Risk Tolerance in Financial Decision Making

Palgrave Macmillan, 2011. — 282 p. — ISBN: 0230281133, 9780230281134Economics, psychology, and neuroscience have converged into a single field under the label of neuroeconomics, aimed to employ recent neuroscientific methods in order to analyze economically relevant brain processes. This innovative field has repeatedly revealed deviations from the classical theory of economists by highlighting that subjects show dysfunctional behaviours which cannot be explained using traditional methods.
This book focuses on the risk tolerance which influences financial decision making. It holds the results of an empirical research investigating the emotional side of risk taking behaviour. A unique experiment was run on more than 400 subjects: bank customers, bankers, asset managers and traders, using both traditional and innovative risk measures. By comparing different risk profiles, relevant implications for market participants and regulators emerge, especially if connected to the new regulations introduced by MiFID, in terms of transparency between intermediaries and customers.