Shortfall Risk Models When Information on Loss Function Is Incomplete

Utility-based shortfall risk measures effectively captures a decision maker's risk attitude on tail losses. In this paper, we consider a situation where the decision maker's risk attitude toward tail losses is ambiguous and introduce a robust version of shortfall risk, which mitigates the risk arising from such ambiguity. Specifically, we use some available partial information or subjective judgement to construct a set of plausible utility-based shortfall risk measures and define a so-called preference robust shortfall risk as through the worst risk that can be measured in this (ambiguity) set. We then apply the robust shortfall risk paradigm to optimal decision-making problems and demonstrate how the latter can be reformulated as tractable convex programs when the underlying exogenous uncertainty is discretely distributed.

Risk perception and behaviour during the COVID-19 pandemic: Predicting variables of compliance with lockdown measures

The COVID-19 pandemic and the measures to counteract it have highlighted the role of individual differences in evaluating and reacting to emergencies, and the challenges inherent in promoting precautionary behaviours. We aimed to explore the psychological and cognitive factors modulating behaviour and intentions during the national lockdown in Italy. We administered an online questionnaire (N = 244) that included tests for assessing personality traits (Temperament and Character Inventory; Locus of Control of Behaviour) and moral judgment (Moral Foundations Questionnaire), alongside behavioural economics tasks addressing different facets of risk attitude (loss aversion, risk aversion and delay discounting). We then assessed the extent to which individual variations in these dimensions modulated participants’ compliance with the lockdown norms. When assessing their joint contribution via multiple regressions, lockdown adherence was mostly predicted by internal locus of control, psycho-economic dimensions suggestive of long-sighted and loss-averse attitudes, as well as personality traits related to cautionary behaviour, such as harm avoidance, and the authority moral concern. These findings show that a multi-domain assessment of the factors underlying personal intentions, and thus driving compliance with government measures, can help predict individuals’ actions during health emergencies. This evidence points to factors that should be considered when developing interventions and communication strategies to promote precautionary behaviours.

The effect of financial knowledge on firm performance

This research aims to know the effect of financial knowledge on firm performance; the role of financial behavior and access to finance as mediation and the role of financial risk attitude as moderation. The object of this research is the owner of small-medium enterprises, sector food and beverage in Malang. Data collection was carried out using a questionnaire of 150 respondents. Data analysis of this research uses partial least square (PLS). The finding indicates that financial knowledge has a positive and significant effect on firm performance; financial behavior mediates the relationship of financial knowledge dan firm performance; while access to finance doesn’t mediate the relationship of financial knowledge with firm performance. This research also found that financial risk attitude weakens the relationship of financial knowledge with financial behavior.

Do risk attitude and trust moderate bank managers' risk perceptions in lending to micro, small, medium enterprises?

PurposeThe purpose of this research is to study the antecedents of risk perceptions of bank managers towards micro, small, medium enterprise (MSME) lending, in the situation of information asymmetry, where cognitive factors assume significance over organisational norms of lending.Design/methodology/approachThis study proposed and tested a conceptual model based on the factors identified from literature review and exploratory and quantitative study. Multinomial logistic regression technique is used for quantitative analysis.FindingsThe research postulates that information asymmetry, risk attitude, perceived trust and organizational norms have a significant relationship with branch managers' perceived risk in lending to MSMEs. The research emphasized that the risk attitude of managers and perceived trust moderate the relationship between information asymmetry and perceived risk. The findings and discussions enrich the knowledge about the alleviators of constraints to MSME funding in developing nations despite information asymmetry.Originality/valueAuthors have given holistic view on the risk perception in the financial decision-making process of bank lending. The research highlights the importance of cognitive factors in decreasing the negative impact of information asymmetry on risk perception.

Contextual modulation of preferred social distance during the Covid-19 pandemic

Social distancing during a pandemic might be influenced by different attitudes: people may decide to reduce the risk and protect themselves from viral contagion, or they can opt to maintain their habits and be more exposed to the infection. To better understand the underlying motivating attitudes, we asked participants to indicate in an online platform the interpersonal distance from different social targets with professional/social behaviors considered more or less exposed to the virus. We selected five different social targets: a cohabitant, a friend working in a hospital, a friend landed from an international flight, a friend who is back from a cycling ride, or a stranger. In order to measure the realistic and the symbolic perceived threat, we administered the Brief 10-item COVID-19 threat scale. Moreover, in order to measure the risk attitude in different domains, the participants were also asked to fill in the Domain-Specific Risk-Taking DOSPERT scale. Results reveal a general preference for an increased distance from a stranger and the friends who are considered to be more exposed to the virus: the friend working in a hospital or landed from an international flight. Moreover, the interpersonal distance from friends is influenced by the perception of Realistic Threat measured through the Integrated Covid Threat Scale and the Health/Safety Risk Perception/Assumption as measured by the DOSPERT scale. Our results show the flexible and context-dependent nature of our representation of other people: as the social categories are not unchangeable fixed entities, the bodily (e.g., spatial) attitudes towards them are an object of continuous attunement.

EFFECT OF FINANCIAL LITERACY AND RISK ATTITUDE ON INVESTOR BEHAVIOR

This research aims to examine the related effects of financial literacy and risk attitudes towards investor behavior in the Indonesian capital market with the motive of saving as a mediating variable. This study uses a quantitative approach and partial least squares- structural equation modelling (PLS-SEM) to test hypotheses. The research data was obtained from 110 questionnaires distributed to capital market investors in Indonesia using the purposive sampling method. The results of this study indicate that financial literacy, risk attitude and saving motives have positive and significant effects on investor behavior in the Indonesian capital market. The influence of financial literacy and risk attitude also has a positive and significant effect on saving motives. However, the motive for saving money cannot mediate the effect of financial literacy and risk attitude on investor behavior. Theoretically, the implications of the results of this study are the level of financial literacy, risk attitude, and saving motives can directly influence investor behavior. The higher the financial literacy, the better the attitude in facing investment risk and the greater the motive for saving, the better the investor's behavior in making investment decisions. Whereas in practical terms, this implication is used as input for investors to further increase financial literacy, pay attention to the level of risk of selected investments, and enlarge the motives for saving so that the purpose of investing can be achieved well.