A little insight on the maze of risk

In this paper, I focus on decision making under risk. According to an epistemological approach, decision making under risk needs to simultaneously consider the objective side of the risk (i.e., risk driven by the intrinsic characteristics of the choice), and the subjective side of the risk (i.e., risk as perceived by the decision maker.The latter implies a further preliminary statement: behaviour under risk is domain-specific. In other words, individuals may accept or refuse to take risk depending on the reference domain (e.g., health, driving, career, leisure time, safety or finance; Nicholson et al., 2005). Finance is the specific domain in which risk ordinarily drives the production of financial products on the offer side and decisions on the buying side. Therefore, this domain represents a natural realm for testing the epistemologic design of the risk analysis. This short note offers food for thought on the main drawbacks that can be experienced in the investment decision process, having assumed the above mentioned objective-subjective risk dialectic.