An investigation of individual investor's financial risk perception

The inadequacy in explaining the decisions of individual investors in the financial markets by the Traditional Finance Theory, that assumes individuals as rational, has led the emergence of "Behavioural Finance" concept. The studies under the title of behavioural finance provide evidence that individual investors are irrational. The most important factor that affects investors' irrational decision mechanisms is the "financial risk perception". In this context, the aim of this study is to group individual investors in accordance with their financial risk perception and to analyse the differences of risk groups on personality, demographic factors and cognitive and emotional biases. In line with the purpose of the study, 804 individual investors residing in Izmir have surveyed. As a result of findings from the data analysis, it is found that risk perception of individual investors differs in terms of personality, cognitive and emotional biases and demographic factors. Keywords: Individual Investor, Investor Psychology, Financial Risk Perception, Personality.