Abstract
The study objective is to investigate the relationship between behavioral finance and the decision to invest in green bonds for the sustainability of environmental assets in Peru. A survey with behavioral questions was applied to a sample of 54 respondents between July and October 2019. Spearman's rank correlation, independence tests, and logistic regression were used. Significant negative correlations were found between the level of education and risk aversion, and between age and risk aversion. A negative relationship was found between risk aversion and the feeling of comfort when investing in stock market instruments such as green bonds. Aversion to a loss in investment decisions was validated; most people choose low-risk fixed income instruments despite feeling safe investing in stocks. According to the logistic regression, the decision to invest in green bonds to improve environmental quality is explained by the variables “green bond rating” and “feeling of comfort (satisfaction) investing in green bonds.”
Highlights
Financial markets behave with limited economic rationality
Following Thaler (1999) and Puaschunder (2018), a “nudge” was applied via the question “how satisfied or comfortable would you feel investing in instruments such as green bonds for Peru to achieve a low-carbon economy,” to which the respondents answered positively
This study aims to encourage more of this kind of investment based on the contribution of behavioral finance to the sustainability of environmental assets in terms of emotionally complementing people's investment decisions
Summary
Financial markets behave with limited economic rationality. They are complemented by the emotions of investors when they make decisions in a context of uncertainty. Richard Thaler is regarded as a pioneer of behavioral finance, having won the 2017 Nobel Prize for Economics in recognition of his contribution to the study of the behavior of financial markets. Among his innovations, Thaler introduced pioneering models of investor psychology to explain empirical challenges such as the predictability of stock prices. Thaler referred to the 2013 Nobel laureate in Economics, Robert Shiller, whose study (1981) sparked a long and complex debate among financial economists; his conclusion is generally thought to be correct
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