Description:

B. Alemanni, G. Brighetti, C. Lucarelli, Portfolio choices, insurance and retirement plans. A financial and psychological perspective. The consilience of several disciplines such as neuroscience, behavioral economics and cognitive psychology converges to the idea that individual decision making under ambiguity and risk is driven by both rationality and gut feelings. This book focuses on those peculiar decisions which drive to portfolio choices, to insurance choices and to retirements plans in the form of pension funds. Theoretical fundamentals of such kind of studies are provided and an empirical research is also described. The latter has been conducted on more than 600 individuals, widely diversified by financial background and occupation. We transfer an experimental methodology from psychological and clinical studies to finance. We start from the hypothesis that when individuals are asked to self-evaluate their risk tolerance, for example by applying a financial questionnaire, their judgment may be different from the effective (uncontrolled) behavior they assume while taking risks. Empirical results support evidence of this phenomenon. Then, we explore the role that the emotional risk tolerance plays within the real-life financial decisions. It is patent that some socio-economic drivers, such as profession, knowledge, familiar and income constraints, are strictly related to portfolio and insurance choices, together with specific retirement plans. Nevertheless, we find evidence that both the risk/return relationship and the inter-temporal choices are also affected by «subjective» perceptions of risks, probability and time. Keywords: Decision-making; Individual behavior; Portfolio choices; Insurance; Pension funds; Financial risk tolerance questionnaire; Psycho-physiological experiment JEL Classification: D81; C91; G11; G22; G23