Mad Cows, Mad Corn, & Mad Money: Applying What We Know About the Perceived Risk of Technologies to the Perceived Risk of Securities

Abstract

Thirty years of research has shown that the concept of risk in people's minds is complex and influenced by many factors. Lessons learned from studies on the perceived risk of technologies and activities (such as eating British beef or genetically modified food) are applied to the perceived risk of securities. How investors may be affected by qualitative dimensions of risk, affect and imagery, and socio-political attitudes and values, are highlighted. Specific recommendations are given for improving portfolio management with a qualitative, multi-dimensional, values-based approach that complements more traditional approaches to analysis of securities.