Differentiation between heuristic and meticulous domain of financial risk taking propensity

Abstract

Relaxing the assumption of rational human being, this study examined the risk taking aspect of financial decision making. In this study financial risk taking propensity is explored with altogether new facet and classify it in two domains. First domain highlights advantageous aspect for wealth and economic prosperity while second can be a menace for wealth and prosperity. Literature is precisely collected to sharpen this peculiarity and to reach on imperative determinants of each domain. Objective is to create differentiation (distinction, discrepancy, peculiarity) between affective (heuristic) and cognitive domain of financial risk taking propensity using empirical approach.  Our results predict that in heuristic domain the bias of dispositional affect and propensity to rely on emotions are significantly dominant factors to take risky investment. Whereas, in beneficial risk taking domain (called cognitive), financial literacy, financial self-efficacy, stock market knowledge and thoughtful analytical processing style found to have significant impact. The evidences reported in this study not only support insightful investment decisions but also elaborate risky behavior of renowned financial players.