Risk & Return: Explaining risk appetite in decision making depending on behavioural finance

Levent Suer, 2012


Individuals should be rational with regards to risky choices, yet it appears that irrationality sources from behavioural variables (Kelly, 2004). This paper combines the academic fields of family businesses and behavioural finance. The study consists of a 2x2 experiment with 134 graduate students. Data was collected through an online survey. The aim of the experiment was to discover the influence behavioural finance variables, respectively Endowment and Sunk costs, have on the risk appetite on the decision maker. It can be concluded that Endowment and Sunk cost have a reinforcing affect and combined lead to risk averse behaviour when faced with risky choices. There was no such evidence found for Endowment or Sunk costs alone.


family business, behavioural finance, risk, return, endowment costs, sunk costs