Abstract
This paper describes how some investors exhibit risk discrepancies when managing household portfolios. The study extends the risk discrepancy modeling literature by documenting (a) the extent to which elicited-portfolio risk is congruent with revealed-portfolio risk and (b) the role financial advisors play in aligning investor elicited- and revealed-portfolio risk. Results show that elicited-portfolio risk is significantly higher than revealed-portfolio risk. While estimating of elicited-portfolio risk are nearly identical, revealed-portfolio risk differs between those who make their own investment decisions and those who rely on a financial advisor. This study’s findings support the notion that investors exhibit risk discrepancies when managing their portfolios.
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