Rationality and Biases: Why Do Risk-Averse Investors Make Poor Choices?
DOI:
https://doi.org/10.46551/epp2024v12n0206Keywords:
Risk aversion; Behavioral finance; Financial asset selection; Savings account.Abstract
The purpose of this study is to explain why risk-averse investors make suboptimal choices in the selection of financial assets. To achieve this, the study discusses the efficient selection of assets from the perspective of classical finance, contrasting it with the biases identified in behavioral finance. This work predominantly adopts a bibliographic and explanatory approach. Additionally, the study analyzes investment decisions in the most popular financial instrument in Brazil, the Savings Account (Caderneta de Poupança), during the period from 2015 to 2022, utilizing quantitative data to evaluate the efficiency of this choice. The findings indicate that many investors opted for investments with negative real returns, suggesting that behavioral biases, such as loss aversion, status quo bias, confirmation bias, and choice overload, play a significant role in decision-making. The study underscores the need for a complementary understanding between traditional financial theory and behavioral finance for better portfolio optimization, thereby offering a more accurate reflection of investors' reality.
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