Title: The control of risk in financial decisions: illusion or reality?

Authors: Antonio D'Amato; Emiliano Mastrolia

Addresses: Department of Economics and Statistics, University of Salerno, Via Papa Giovanni Paolo II, 84084, Fisciano (SA), Italy ' Department of Economics and Statistics, University of Salerno, Via Papa Giovanni Paolo II, 84084, Fisciano (SA), Italy

Abstract: Based on a sample of Italian students enrolled in a Master's degree course in Economics, this work investigates the illusion of control in financial decisions under uncertainty. In four experimental rounds, empirical results provided evidence that is compatible with the illusion of control as the participants demonstrated a greater propensity to invest in a risky asset in the experimental rounds where they believed to have higher control of the events. However, participants have a low propensity to pay to control the game. These results are supported by an investigation of the locus of control. The results highlight that participants have a high perception that they can control a given situation. Consequently, the participants that express high internal control are more prone to allocate resources to a risky asset. Implications for theory and practice are also discussed.

Keywords: risk; illusion of control; investment; finance; decision.

DOI: 10.1504/IJBAF.2023.131647

International Journal of Behavioural Accounting and Finance, 2023 Vol.7 No.1, pp.41 - 54

Received: 28 Jan 2022
Accepted: 09 Nov 2022
Published online: 21 Jun 2023 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article