Understanding Investors Sentiments and Risk Appetite: A Study of High – Risk Equity Investment Decisions

Abstract

This dissertation explores the fascinating relationship that exists between investor emotions and investment choices, especially in the case of high-risk stocks. Conventional finance theory depicts investors as logical agents who carefully consider their options after doing in-depth data analysis. Behavioral finance, on the other hand, challenges this romanticized view by emphasizing the significant impact that biases and emotions have on investor behavior. The purpose of this study is to close the gap between theory and practice by investigating the ways in which investor sentiment influences decisions about high-risk stocks. These stocks have a high potential return but a high chance of suffering major losses. They are frequently associated with startups or erratic industries. The study will investigate how investors evaluate emotional cues against risk perception and portfolio diversity when making judgments regarding these high-stakes options.