Higher Risk Tolerance Research Articles

Understanding Dynamic Mean Variance Asset Allocation

We provide a new portfolio decomposition formula that sheds light on the economics of portfolio choice for investors following the mean-variance (MV) criterion. We show that the number of components of a dynamic portfolio strategy can be reduced to two: the first is preference free and hedges the risk of a discount bond maturing at the investor's horizon while the second hedges the time variation in pseudo relative risk tolerance. Both components entail strong horizon effects in the dynamic asset allocation as a result of time-varying risk tolerance and investment opportunity sets. We also provide closed-form solutions for the optimal portfolio strategy in the presence of market return predictability. The model parameters are estimated over the period 1963 to 2012 for the U.S. market. We show that:(i) intertemporal hedging can be very large, (ii) the MV criterion hugely understates the true extent of risk aversion for high values of the risk aversion parameter, and the more so the shorter the investment horizon and, (iii) the efficient frontiers seem problematic for investment horizons shorter than one year but satisfactory for large horizons. Overall, adopting the MV model leads to acceptable results for medium and long term investors endowed with medium or high risk tolerance, but to very problematic ones otherwise.

Determinanten der Weiterbildungsbereitschaft gering qualifizierter Arbeitsloser

AbstractWeiterbildungsangebote sind wichtige Instrumente der aktiven Arbeitsmarktpolitik. Für ihren Erfolg ist unter anderem von Bedeutung welche Arbeitslosen zu einer Teilnahme bereit sind. Der vorliegende Beitrag beschäftigt sich mit den Determinanten der Weiterbildungsbereitschaft bei gering Qualifizierten, d. h. bei Personen ohne (verwertbaren) beruflichen Abschluss. Die vorgenommene Untersuchung beruht auf einer Kombination aus Befragungs- und Prozessdaten und kommt zu dem Ergebnis, dass Personen mit größerer Risikoneigung eher bereit sind, sich weiterzubilden, ebenso wie solche mit ausländischer Staatsbürgerschaft oder Migrationshintergrund. Frühere Teilnahmen an Weiterbildungsangeboten erhöhen ebenfalls die Teilnahmebereitschaft. Eine größere Anzahl an Episoden, in denen Arbeitslosengeld (ALG) II bezogen wurde oder eine längere Dauer im ALG-I-Bezug verringern sie hingegen.

Changes in the Risk Tolerance of US Households During 1992-2013

This research extends the work of Yao, Hanna, and Lindamood (2004) and others in attempting to ascertain how stock market fluctuations affect the risk tolerance of households. We used the 1992 to 2013 datasets of the Survey of Consumer Finances (SCF), and found that whether respondents were willing to take some risk varied somewhat during the period, with proportions increasing in the 1990’s with the increases in stock market levels, and decreasing since 2001. In contrast, the proportion of respondents willing to take substantial or above average investment risk (“high risk tolerance”) fluctuated much more during the period in relative terms, and generally was high after a sustained period of stock market gains. The proportion of respondents with high risk tolerance was low in the 2013 SCF, but is likely to be higher in the 2016 SCF. Logistic regression analyses controlling for age, racial/ethnic status, household composition, and other characteristics had generally similar results to the descriptive patterns, so the changes do not seem related to changes in household composition.

The Investment Risk Tolerance of Same-Sex Couples

Although there are over one million same-sex couple households in the United States, there has not been much research on their investment attitudes and behavior. This study uses datasets from the combined 1992, 1995, 1998, and 2001 Surveys of Consumer Finance to compare same-sex couples to other household types in terms of risk tolerance and stock ownership. Same-sex couples are similar to married couples with a male respondent in terms of risk tolerance, and same-sex male couples are similar to married couples in terms of stock ownership. However, despite having higher risk tolerance, same-sex female couples are much less likely to own stock than predicted by their level of risk tolerance and objective characteristics. It is possible that financial advisors are underserving this market segment or giving inappropriate advice.

Gender differences in saving behaviors among low- to moderate-income households

In this study we explore gender differences in saving behaviors among low- to moderate-income households using data collected online from a national sample of low- to moderate-income households (NC1172) and data on similar income single households from the 2010 Survey of Consumer Finances (SCF). Results show that saving behaviors differ by gender. With the NC1172 sample, we find gender differences in the effects of high-risk tolerance and being non-White on the likelihood of being a saver. In the SCF, the presence of other household members affects savings differently for women and men. Educators and counselors can encourage savings among men and women in low- to moderate- income households as a way to reduce financial risk and ensure financial security.

Safety Culture, Policies and Practices in Nigerian Maritime Industry: The Exxon-Mobil Experience

Over the years, issues on safety culture and policies in maritime industry have received widespread research attention. Some maritime firms have even gone further to anchor their safety policies on learned corporate culture. However, whether these policies are fully embraced and complied with by seamen is a different kettle of fish altogether. This study therefore, examines safety culture, policies and practices in Nigerian maritime industry with a view to ascertaining: the extent of freight men’ awareness and compliance to safety policies, identifying hindrances to conformity with safety policies and practices, and determining intervention options that management of Exxon-Mobil could use to foster safety compliance. The study adopts a survey approach, with structured questionnaire, and gathering primary data from seamen onboard. The findings reveal that workers are aware of the various safety policies and practices put in place by management, but adherence is impeded by several factors-inadequate staff strength, crew fatigue, and poor wages. Others include contract labour, inadequate safety training, complacency, and high risk tolerance. Surprisingly, improper handover and supervisory interference were not potent enough to hinder compliance with safety regulations at sea.

Coaching and Coach Education in Sweden

The purpose of this article is to describe the status of coaching and coach education in Sweden. The Swedish Sport Movement can be traced to the distinctive cultural and political characteristics that exist in Sweden and in other Scandinavian countries. The typical Swedish coach has been described as a collectivist, having a high work ethic and believing strongly in the importance of the group (Birkinshaw & Crainer, 2002). They build their coaching on what are traditionally considered female values, have a high-risk tolerance and there is often a lack of hierarchy in the coach-athlete relationship. Most coaching is done on a voluntary basis and the different Sport federations design and deliver coach education. There is no standard or uniform coach education regarding content, structure and costs. In addition, the quality of coach education in Sweden has not been assessed. Although many coaches recognize the importance of learning from other coaches, research has found that coaches in Sweden are seldom prepared to reflect and to think critically (Fahlström, Glemne, Hageskog, Kenttä, & Linnér, 2013; Hedberg, 2014).

The private equity premium puzzle: a behavioural finance approach

This paper adds new insights on the specificities of entrepreneurs, by focusing on the specificity of entrepreneurs' financial behaviour. First, we provide a detailed review of the literature on the private equity premium puzzle. This review underlines that, from a financial perspective, entrepreneurs differ from non–entrepreneurs because of the low, according to financial theory, risk–return trade–off of their asset portfolio. Our analysis of the literature shows that the higher risk tolerance of entrepreneurs is not sufficient to explain the private equity premium puzzle. Therefore, we apply behavioural finance in order to explain why entrepreneurs, who are aware of their high risk exposure, do still accept low returns. We show how cognitive biases can explain the private equity puzzle. Moreover, we highlight that this puzzle can be understood in light of cumulative prospect theory (Tversky and Kahneman, 1992) and behavioural portfolio theory (Shefrin and Statman, 2000) findings.

Choosing to be trained: Do behavioral traits matter?

In this paper, we examine the determinants of self-selection into a vocational training program in India. To do this we combine data from an artefactual field experiment with survey data collected from the targeted community. We find that applicants and non-applicants differ in terms of socio-economic characteristics (measured using a survey), as well as selected behavioral traits (elicited using an artefactual field experiment). Even after controlling for a range of socio-economic characteristics, we find that individuals who have higher tolerance for risk, and are more competitive, are more likely to apply to the training program. This suggests that focusing only on the socio-economic and demographic characteristics might not be sufficient to fully explain selection into the program. Participants’ behavioral traits are also crucial in influencing take-up rates in such programs. Our results suggest that as a methodology, there is valuable information to be gained by dissecting the black box of unobservables using data on behavioral traits.

Noisy Rational Expectation Equilibrium with Actively Managed Fund Sector

As there is virtually no empirical evidence that fund managers outperform passive benchmarks, public investors face a serious question as to whether they should invest in actively managed funds. This paper develops a model of a dynamic asymmetric information economy with heterogenous risk averse investors and active funds and solves for the noisy rational expectation equilibrium. Low risk tolerance investors are found to be strictly better off with the active funds, but the high risk tolerance ones are not. The size of an actively managed fund is not monotonically increasing in the fund manager's skill level, so fund size is not a reliable indicator of managerial skill. The market reacts to the manager's increasing risk-taking behavior by reducing the market price of risk, volatility and risk premium. Asymmetric information creates an automatic mechanism for public investors to protect themselves from the manager's excessive risk-taking. Indeed, the distribution of risk tolerance coupled with adverse selection set limits on the fund manager's risk-taking levels.

Revolution, Personalist Dictatorships, and International Conflict

AbstractA consensus exists that countries that have recently undergone domestic political revolutions are particularly likely to become involved in military conflicts with other states. However, scholars seek to understand when and why revolutions increase the likelihood of international violence. In contrast to existing work focusing on international systemic factors, we argue that revolution fosters conflict in part by affecting states’ domestic political structures. Previous research has shown that revolution tends to bring particularly aggressive leaders to power. We demonstrate that revolutions also frequently result in personalist dictatorships, or regimes that lack powerful institutions to constrain and punish leaders. By empowering and ensconcing leaders with revisionist preferences and high risk tolerance, revolutions that result in personalist dictatorships are significantly more likely to lead to international conflict than revolutions that culminate in other forms of government. Our arguments and evidence help explain not only why revolution so commonly leads to conflict, but also why some revolutions lead to conflict whereas others do not.

Donations, risk attitudes and time preferences: A study on altruism in primary school children

We study in a sample of 1070 primary school children, aged seven to eleven years, how altruism in a donation experiment is related to children's risk attitudes and intertemporal choices. Examining such a relationship is motivated by theories of reciprocal altruism that provide a cornerstone for understanding human social behavior. We find that higher risk tolerance and patience in intertemporal choice increase, in general, the level of donations, albeit the effects are non-linear. We confirm earlier results that altruism increases with age during childhood and that girls are more altruistic than boys. Having older brothers makes subjects less altruistic.

Determination of Financial Risk Tolerance among Different Household Sectors in Sri Lanka

This study examined the financial risk of tolerant behavior at the household level with particular emphasis on different household sectors in Sri Lanka. The analysis measured, the household willingness to take financial risk or risk tolerance based on a questionnaire survey. Financial risk tolerance was measured with the help of a likert-scale and a composite index was developed using the values for the answers. The study used descriptive statistics and also the one-way analysis of variance (ANOVA) test to compare the risk tolerance between the three main household sectors, i.e. urban, rural and estate. The effects of socio-econ-demographic factors upon financial risk tolerance of households were investigated using Tobit regression analysis. The results revealed that a majority of respondents exhibited an above average (high) risk tolerance as a whole and demonstrated significant differences in risk tolerance preferences of households at sectoral level. The results indicate that gender, age, education, occupational status, income, income diversification, distance to a financial institute and financial literacy are significant in the determination of the financial risk tolerance. The findings provide inputs for designing policies for the development of the financial markets in the Sri Lankan context.

More Possesions, More Worry

A common wisdom asserts that the wider the universe of assets to choose from the greater the investor’s welfare. We show that this is not the case in practice where parameters have to be estimated even when the estimates are unbiased. Surprisingly, risk aversion plays a crucial and rather uncommon role corresponding to the desirability of asset expansion by dividing investors in three groups: we find that Investors with very low (group 1) and investors with very high (group 2) risk tolerance are better-off with asset expansion and investors with moderate risk tolerance (group 3) are worse-off despite the option to refrain from investing in the additional asset. These results have implication to the CAPM, the existence of mutual funds and the observed small portfolios held by investors.

Donations, Risk Attitudes and Time Preferences: A Study on Altruism in Primary School Children

We study with a sample of 1,070 primary school children, aged seven to eleven years, how altruism in a donation experiment is related to children’s risk attitudes and intertemporal choices. Examining such a relationship is motivated by theories of reciprocal altruism that provide a cornerstone to understand human social behavior. We find that higher risk tolerance and patience in intertemporal choice increase, in general, the level of donations, albeit the effects are non-linear. We confirm earlier results that altruism increases with age during childhood and that girls are more altruistic than boys. Having older brothers makes subjects less altruistic.

Canadian Association of Gastroenterology position statement regarding the use of thiopurines for the treatment of inflammatory bowel disease.

Canadian Association of Gastroenterology position statement regarding the use of thiopurines for the treatment of inflammatory bowel disease.

Assessment of risk tolerance level of Indian individual equity investorsAn empirical analysis

Return and risk are part of investment decision. The relationship between risk and return is direct with higher returns associated with higher risk while lower risk will mean lower returns. Many Investors are clueless about their natural ability to take risk and their disposition towards facing risky prospects. Investors may not differ in their objectives and knowledge about their investments, however differ significantly in their propensity to take risk or tolerate risk present in their investment decisions. Thus, risk tolerance is a crucial aspect of the shrewd art of investing. The present paper traces various financial Risk Tolerance Assessment methods and presents the dynamics and intricacies of each method to assist the equity investors who undertake high investment risk. Further, it scientifically assesses the financial risk tolerance level of Indian Equity investors. The equity investors are profiled into five categories: Low risk, Below average risk, Moderate risk, Above average risk and High risk tolerance based on responses to questions characterising investment decisions. This empirical study on Indian investors has some profound implications for equity investors, investment managers and brokerage firms. The investment product designers can design array of products which can cater to the investors who can incur low and moderate as majority of the Indian equity investors’ are found to be moderate risk takers. The brokerage firms also can advice their clients in choosing less volatile stocks based on their ability and willingness to take risk.

Domestic Revolutionary Leaders and International Conflict

There is a strong scholarly consensus that domestic revolutions create conditions ripe for international conflict. Traditionally scholars have treated revolutions as events, after which there is a period of time during which international conflict is more likely. Yet some states experience significant international conflict only during and in the immediate aftermath of a revolution, whereas other states continue to engage in conflict for many years and even decades afterward. This article seeks to explain the persistence of conflict for some but not all revolutionary states by differentiating the concept of revolutionary leaders from that of revolutions as events, both theoretically and empirically. The author shows that existing theories linking revolution to international conflict underemphasize an important mechanism through which revolution leads to conflict: by selecting conflict-prone leaders through the dynamics of revolutionary politics. He argues that revolutionary politics allow leaders with certain characteristics, including high risk tolerance and strong political ambition to alter the status quo, to obtain executive office because individuals without these characteristics generally do not succeed in leading revolutions. Having obtained power, revolutionary leaders have aggressive preferences that make their states more likely than nonrevolutionary states to instigate international conflict.

Americans’ Crash Histories and Opinions on Safety Policy

This paper examines the influence of driving experience and habits, citation histories, vehicle ownership, and demographics on the crash risk and safety policy opinions of more than 1,000 Americans. Model results suggest that increased driver crash probability and decreased support for crash countermeasures correlate with criminal history and high tolerance for risk, both of which are more prevalent among men than women. Noninjury crash involvement—controlled for years of driving, a measure of exposure—appears to be more common for those with busy lifestyles, who have higher education and more household vehicles. Support for crash safety policies appears to be largely independent of the crash history of a survey respondent and his or her family but to be linked to gender, marital status, and level of education. Women and lower-income households are more likely to support safety policies, although those with higher educational attainment are generally less likely to support such policies. Finally, results suggest that unfamiliarity may be a key (but surmountable) barrier to the introduction of technology-based safety policies, such as speed limiters.

Psychiatry Emergency Service Can Do More Than Triage

Back to table of contents Previous article Next article Clinical & Research NewsFull AccessPsychiatry Emergency Service Can Do More Than TriageAaron LevinAaron LevinSearch for more papers by this authorPublished Online:2 Nov 2012https://doi.org/10.1176/pn.47.21.psychnews_47_21_16-aAbstractRecovery—isn’t that something that takes lots of time to bring to reality for a patient? Mark Winfrey/ShutterstockNot when it happens in the emergency department (ED), Anthony Ng, M.D., said last month at APA’s Institute on Psychiatric Services in New York.“The ED is the gateway to care,” said Ng, chief medical officer of Acadia Hospital and chief of the psychiatry service at Eastern Maine Medical Center in Bangor, Maine. “This is where they’ll get their first impression of psychiatry, so even if they’re not ready to accept treatment, we can prepare them for that moment.”Traditionally, ED psychiatry worked on a “triage-and-refer” model. Now an alternative approach (at least for some patients) involves receiving the first stages of treatment there, although not without some adjustments.For instance, the practical concerns of operating an ED—urgency, safety, and throughput—create an ethos at odds with the usual paradigm of psychiatric care, said Ng.“You have to do recovery work in minutes or hours versus days or months,” he said. But there can be a payoff if that effort reduces use of restraints or leads to fewer readmissions and return trips.Psychoeducation, case management, and even a little cognitive-behavioral therapy can all happen in the ED, said Ng. “These are possible with many patients, but not all.”Engaging patients long enough to figure out what they really want when they approach the hospital may reveal that alternatives like day hospitals, crisis teams, or even phone calls may meet their needs and cut unnecessary usage. That can open up beds needed for other patients in the ED.“Needing a medication refill is not a crisis,” said Ng. “We try creating a ‘crisis card’ for each patient, giving him or her a list of alternatives to the ED. We also try to involve families and the patient’s other medical professionals in treatment planning. There is a dynamic relationship, in flux all the time, between partnership and paternalism” that needs adjustment with each patient and at different times.Making a decision to hospitalize or discharge patients after an examination in the ED is a careful balancing act that benefits from experience in the emergency setting, said Jon Berlin, M.D., recently retired as director of the psychiatric emergency services in Milwaukee.“We can help long-term practitioners with cases when their patients are in crisis,” said Berlin. “We put much weight on their point of view if they request that a patient be hospitalized, and we can also serve to consult them about risk tolerance.”In fact, emergency-service psychiatrists have very high risk tolerance and are less risk averse than their community psychiatric colleagues, he said. “We’re less likely to hospitalize.”Treating patients in the hospital can go a long way toward mitigating the risks of coercive care and the damage to the therapeutic alliance, said Berlin. “But not a lot is being done now in the hospital when stays are short and patients are quickly released on medications.”The ED evaluation should not only weigh risk and protective factors and ways to eliminate risk, but also document the reasoning process behind a decision to admit to the hospital or discharge to other forms of care, he said.Berlin also discussed how peer support in the ED can help patients and staff. “Peer specialists remind staff on a daily basis of the patient’s point of view,” he said. “They are role models for patients, instilling hope of recovery. Peers are ready to engage the patient right away, even in the waiting room, lessening hostility.” To access an audio interview with Ng, go to www.psychnews.org/update/audio/IPS-12-TonyNg.mp3. ISSUES NewArchived