Risk perception in finance

Risk perception in finance refers to how individuals evaluate and interpret the likelihood of financial loss or gain. It influences investment decisions based on personal experiences, emotions, and social influences, leading to varying beliefs about the risks associated with different assets or market conditions. For instance, someone may perceive stocks as highly risky due to market volatility, while others may view them as a suitable long-term investment. This perception can affect behaviors such as risk tolerance, investment strategies, and overall financial planning, shaping how people approach their finances in uncertain situations.