Recently, there has been an increased interest in risk tolerance. The level of risk tolerance of an individual has a direct influence on consumption and on the way he/she will assign his/her assets; it is understood that less tolerant individuals look for safer options for their investments. In order to test a possible influence of emotion on risk tolerance, a 1,016-individual survey was carried out in Brazil. Also, to define the emotional factor for risk tolerance, we have mainly used confirmatory factor analysis and two tests: KMO and Bartlett's sphericity test. Afterwards, a regression analysis was made to test the influence of emotion on the tolerance level of the tested individuals. The results indicate a misattribution bias for the case of the decision process in individuals with positive humor who have shown to be more tolerant to risk.

Loewenstein (2000) argues that the emotions and feelings experienced at the time of making a financial decision might influence investors about the assets evaluation.
Hence, a new area of research has approached the impact of investors’ emotions on the decision-making process. The first area covers mood misattribution.

This new area views mood misattribution from the investor’s perspective. It investigates the impact of mood on human perception and is based in psychology, which argues that individual decisions are guided, in part, by their feelings.

This is generally seen as beneficial for decision making by Lucey and Dowling (2005). However, people, who are sometimes induced by this context, could allow transitory factors, such as mood, to influence independent decisions. This phenomenon, according to Lucey and Dowling (2005) is usually associated with complex decisions involving risk and uncertainty. Thus, mood fluctuations might partially influence the decision making about assets allocation; for example, compared to people in a neutral mood, people in a good mood tend to make a more optimistic value judgment and individuals with a negative mood tend to be more pessimistic when they evaluate their investments.

Nowadays, studies dealing with individuals’ attitude towards risk have become more and more attractive, since such attitude has a direct influence on consumption of goods and allocation of assets, considering that less tolerant individuals tend to look for safer options for their personal and corporate investments.

In spite of the significance of the subject, there are still very few studies that show the impact of emotions on the individuals’ attitude when facing risk. There is, hence, an empirical gap that shows an evident association between emotions (experienced while taking financial decisions) and the tolerance level of individuals towards risk.

Understanding risk tolerance, especially regarding the way emotions influence attitude towards risk, could provide the researchers with the conditions that would allow them to understand the impacts of emotion on their decisions and of their possible consequences when allocating assets. Hence, this work aims to answer the following question: Does emotion have an influence on attitude towards risk?

Behavioral Finance Journal, Asset Pricing, Contingent States, Capital Asset Pricing Model, Prospect Theory, Financial Literature, Bullish Market, Asymmetric Evaluation, Capital Asset Pricing Model, French Market, Political Crises, Asian Financial Crisis.