Finance taught in schools generally starts with the efficient market hypothesis, which holds the assumptions of rational investors and markets where all information available is reflected. In recent years however, a lot of critique has been given to efficient markets and its assumptions of rationality. The greatest reason to this is because of crashes and irregularities in the market. The field of behavioural finance has been in existence for many years but is not as established as the efficient market hypothesis. It says that investors may act irrational and are mostly trying to explain the reasons why. People’s behaviour is being closely studied in order to see patterns of behaviour and this has resulted in different heuristics and biases. Heuristics are instances that come to mind when making a decision and differ a lot depending on what kind of decision you are making. Since there are many different heuristics, this thesis only focused on one: the affect heuristic. The method was constructed in a specific way in order to show if the students showed affect in their answers. Also, a check for home bias was made. This thesis presents the behaviour of two different groups of students, finance students from Sweden and MBE-students from Germany. It was proved that both of the groups were acting irrational in their investment decisions. The reason to their irrationality is both because the method was constructed in a way to strategically mislead them but also because of the data collection. There were also some differences noticed depending on age groups, former studies in finance and work experience in finance. The affect heuristic was clearly shown in the answers by both groups of students. A home bias was also noticed in the answers. It was proven that 10,3 percent of the Swedish students invested in Swedish companies in both their first and second choice, even though the three best companies were German. None of the German Students decided to invest in a Swedish company in both the first and second choice.

xv, 145 p. : ill. (some col.) / This dissertation examines the role of affect in consumer judgments in two essays. The first essay explores the use of affect as a heuristic basis for judgments of the risks and benefits associated with new products. Current perspectives regarding the processes by which consumers make decisions about the adoption of innovations maintain that it is largely a cognitive process. However, the four studies that make up the first essay suggest that consumer assessments of the risks and benefits associated with product innovations are often inversely related and affectively congruent with evaluations of those innovations. The results support and extend previous research that has investigated the affect heuristic in the context of social hazards. The findings further indicate that more affectively extreme evaluations are associated with increasingly disparate assessments of risk and benefit. The results indicate that this relationship is consistent across a variety of products and product categories. Together, these findings challenge traditional conceptualizations of innovation adoption decision making and suggest that cognitive models alone are insufficient to explain innovation adoption decisions. The second essay investigates if processing fluency - the difficulty associated with processing information - may serve as an input to the affect heuristic and subsequent judgments of risk and benefit. Recently, Song and Schwarz investigated the relationship between differences in fluency and perceptions of risk. Their results suggested that fluency experiences influence risk perception through differences in familiarity and not as the result of fluency-elicited affect. The three studies included in the second essay re-examine those results in an effort to clarify the role of affect as a basis for perceptions of risk. The findings document a previously unreported reversal in preference for less fluent stimuli and suggest that fluency-elicited affect can explain the relationship between processing experiences and perceptions of risk. The results have important theoretical implications for our understanding of how people derive meaning from fluency experiences and for the role of fluency-elicited affect as a basis for judgments of risk and benefit. / Committee in charge: David Boush, Chairperson; Robert Madrigal, Member; Joan Giese, Member; Paul Slovic, Outside Member

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Drawing from the black swan theory developed by Nassim Nicholas Taleb, which defines a black swan to be an unexpected high-impact event which people tend to think is easily explained in hindsight, this study explores risk evaluation in relation to conspiratorial beliefs. The hypothesis states that a higher degree of conspiratorial thinking correlates with a proclivity to evaluate risks as being either very high or very low. The method used was a web-based survey consisting of 16 different events, both conspiratorial and non-conspiratorial, of which a total of 291 American participants got to assess the risk by paying a hypothetical sum of money for insuring themselves against the consequences of each event. This was followed by a second survey to assess the participants’ degree of conspiratorial thinking. The first analysis measured the correlation between conspiratorial thinking and the standard deviation of the participants’ money distribution, corresponding to degree of disparity in risk assessment. Based on two clusters that were observed in the aggregate of scores on the conspiracy scale, the participants were divided into conspiracy theorists and non-conspiracy theorists. The second analysis measured main- and interaction effects of what types of events the participants insured themselves against, and what types of events that participants prioritized depending on their degree of conspiratorial thinking. The hypothesis that a higher degree of conspiratorial thinking correlates with a tendency to evaluate risks as being either very high or very low was not supported. The results show that a higher degree of conspiratorial thinking correlates with a lower standard deviation in money distribution, and that the conspiracy theorists insured themselves against the consequences of less likely and more conspiratorial events compared to the non-conspiracy theorists. This study supports the idea that conspiracy theorists tend to follow a consistent conspiratorial narrative, believing in several conspiracy theories and not just one.

This work is based on an assumption that human decision-making process is following several approximate rules (heuristics) that causes predictable and systematic errors in judgement (cognitive biases). Although this stand point is typical for fields like behavioural economics or behavioural law and economics, there is no reason to not apply this logic also on other discipline like a mass media communication studies. This work offers an analysis of the information market where supply side is represented by producers of information (e.g. media organizations) and demand side is represented by consumers of those information (audience). The analysis is focused on factors that cause perceived description of a particular event can vastly differ from this event. One of those cognitive biases which cause different perception of the same media content is called hostile media effect. In respect to this effect, sympathizers with a socially controversial topic tend to perceive information in the mass media as hostile to their own opinion. Previous research concluded that hostile perception is mainly caused by a reach of information which is explained by the selective categorization - although individuals with different worldview can see the same content, they perceive it with a different valence. The valence of the...