Risk Tolerance Of Investors Research Articles

Title of the article: Impact of Socio-Demographic Factors on the Self-Assessed Financial Risk tolerance of Investors

Title of the article: Impact of Socio-Demographic Factors on the Self-Assessed Financial Risk tolerance of Investors

Financial Satisfaction of Middle-Income Individuals of India: An Empirical Study with Specific Reference to the Residents of Uttar Pradesh

The opening up of the Indian Economy to private financial service providers in the last decade of the twentieth century opened up a plethora of new investment opportunities to the Indian investing public bringing in an era of the shifting government policies in the domain of human well-being. The study of investor behavior and its associated parameters in the Indian context has, therefore, become imperative in the present scenario. It is anticipated that by the year 2020 with 11 percent global share in consumption by Indian middle class will reach to the third highest in the world. It is further expected to rise and reach to the first place with 23 percent global share by the year 2030. The central focus of the present study is to develop a framework for financial satisfaction for middle-income investors in India. Personality type is one of the main determinants of financial satisfaction. It also influences the financial socialization, financial knowledge, financial risk tolerance and financial behavior of investors thus, it indirectly also influences the financial satisfaction. According to the findings of the present study, financial knowledge does not affect financial satisfaction directly.

Some Forms of InvestorRiskTolerance in Investing: Review Theory

Investors in investing are always accompanied by a sense of tolerance for the risk of funds invested in an asset. Each investor has a different form of risk tolerance, depending on the function of the utility. This paper aims to conduct a theoretical study of the forms of investor risk tolerance for several utility functions. This study is carried out by reviewing several utility functions which include: square root utility, cubic fraction utility, quadratic utility, exponential negative utility, and logarithmic utility. Based on the results of the study for each of these utility functions, successively obtained risk tolerance in the form of linear, linear, linear, constant, and linear. Linear risk tolerance illustrates that an investor changes the value of his investment in line with changes in the level of risk faced.

FINANCIAL RISK TOLERANCE ANALYSIS OF INDONESIAN RETAIL INVESTORS

Purpose: This study aims to analyze how risk tolerance of Indonesian retail investors is based on sociodemographic characteristics and also related to the multidimensional risk Due to the different characteristics of investors turn out to become different levels of risk tolerance for each individual investor, hence considering investor's sociodemographic factors is very important in assessing risk tolerance.
 Methodology: This study used quantitative analysis. The random sampling was obtained from the sample cohorts, which consist of the Indonesian retail investor club. Data was collected through an online survey and gathered 407 respondents. Then, the data was analyzed by using PLS with Smart-PLS 3.0 software.
 Result: Our findings showed that the most of socio-demographic variables such as age, gender, marital status, education, and income affected the financial risk tolerance, whereas ethics do not affect financial risk tolerance. And risk capacity partially mediated socio-demographics on financial risk tolerance.
 Application: The investor and financial advisers would use this analysis in assessing risk tolerance and determining the best type of investment and best suits the risk preference of investors.
 Novelty: To the best our knowledge, this study is pretty scarce. Not like the previous studies, this research also use an advanced method which explores variables interdependency. This research is the first one in Indonesia, which compiles socio-demographic variables. And also it is an enriched empirical and literature manner.

Calm Before the Storm: An Early Warning Approach Before and During the COVID-19 Crisis

This paper develops a means of visualising the vulnerability of complex systems of financial interactions resulting from the changing risk tolerance of investors. The investors' risk behavior contributes to the buildup of vulnerability in crisis and in calm periods. We show how both time-varying risk tolerance and spillover indices can be translated into two-dimensional information transmission and crisis transmission maps, respectively. Taken together, the information transmission maps have the advantage of highlighting potential crisis transmission pathways in the crisis transmission maps. These maps provide clear visualization showing information transmission predates crisis transmission drawing from conditional signed spillover and risk tolerance indices computed from equity market data for 31 global markets between 1998 and 2020. We examine if investors' risk preference induces a crisis and to what extent such a predictor may be related to a pandemic. Furthermore, we take a special look at the COVID-19 pandemic and its impact on the dynamics of systemic crisis transmission.

Financial Literacy and Financial Risk Tolerance of Individual Investors: Multinomial Logistic Regression Approach

Financial risk tolerance is one of the important factors affecting the financial investment decisions of individuals and institutional investors and a crucial factor of financial planning and financial counseling. It is therefore necessary to determine the major determinants of risk tolerance. In this article, we researched the impact of financial literacy level and demographic characteristics on the financial risk tolerance of the individuals in the sample of Usak University staff, using a multinomial logistic regression analysis and retrieving data through the questionnaire method. Multinomial logistic regression is an extension of binary logistic regression, allowing for three or more categories of the dependent variable. The findings of the empirical analysis reveal that financial literacy and demographic characteristics of age, gender, education, and income levels are significant determinants of financial risk tolerance. In this regard, the improvements in the financial literacy of the individuals through various education programs will probably raise the demand of financial products with different risk characteristics and in turn contribute to the development of financial sector.

Risk Tolerance and Satisfaction Level of Mutual Fund Retail Investors

The retail investors in India are characterized by an affinity to avoid risk and they lack the mental readiness to absorb the shocks of the volatile capital market. Hence, to attract the surplus funds possessed by the retail investors into the capital market, intermediaries like mutual funds are required. Though apparently mutual funds were intended to cater to the needs of the retail investor, the stock market has not won investors’ confidence to attract a growing share of household’s financial savings. Today, more players are entering into the market and a naïve investor is unable to deploy the investment in the right direction. The study analyse the retail investors financial decision in terms of investing their savings in the capital market through mutual fund investment. The study found that, investor’s with moderate risk tolerance level prefer to invest in mutual funds and return, marketability and liquidity are the most satisfying factors investor they look on.

How do emotional intelligence and behavioral biases of investors determine their investment decisions?

PurposeIn earlier studies, research has shown that EI is the only element, which influences the ways in which people develop in their lives, jobs and social skills control their emotions and get along with other people. It is EI that dictates the way people deal with one another and understand emotions. The research gap is to explore the impact of behavioral factors and investors psychology on their investment decision-making.Design/methodology/approachThe information was gathered from 500 financial specialists. The region of research was the financial specialists who contribute through LSC Securities Ltd. in Punjab State. The purposive testing system was used in this examination.FindingsThe investigation found that the positive connection between the conduct predispositions of the financial specialists and venture choices of the speculators and positive connection between enthusiastic insight of the financial specialists and their venture choices. Yet, the authors found that the enthusiastic insight better foresees the venture choices of the financial specialists than the conduct predispositions of the speculators. Among the different elements of conduct inclinations of the speculator’s lament and carelessness are identified with the financial specialist’s venture choices. Among the various estimations of eager understanding – care, dealing with emotions, motivation, empathy and social aptitudes are related to the hypothesis decisions of the monetary pros.Research limitations/implicationsThe sample selection was based on purposive sampling, rather than a random probability sample. The sample was area specific, restricted only to Ludhiana Stock Exchange in Punjab state. Therefore, the results of the study cannot be generalized with certainty to all the investors investing through other exchanges in other states. The inferences are based on the assumption that the data provided by the investors are true and correct. The findings may be relevant for other stock exchanges as that of the Ludhiana Stock Exchange. However, the authors do not claim the generalization of the results.Practical implicationsThis study also helps to understand the relationship between investment decision-making and risk tolerance of investors. It will helpful for the financial advisors to know the behavioral biases of investors while making an investment decision, and therefore, they can advise investors properly to mitigate such biases. It may help the investors in understanding the subjective part of their behavior and control their emotions while taking decisions for their investment in stock market options.Social implicationsThis research will help investment advisors and finance professionals to judge investors’ attitudes toward risk in a better way, which leads to better investment decisions.Originality/valueThis study is my own study and it is original and has not been published anywhere.

An Empirical Analysis of Investor Behavioral Biases, Investment Risk Tolerance and Decision-Making

It is very necessary for the judgment on financial investment adopted by professional investors to be able to face behavioral biases by recognition of their own psychological traits as well as to take account of their own investment risk tolerance levels. In this research, a survey has been used to assess the association among personality traits, behavioral bias as well as investment risk toleration. The research paper dataset was shortlisted from individual investors who work or operate on capital/finance markets. Chi-square assessments and multivariate regression analysis evaluated the predictions established during the research. Depending on the hypothesis analysis, there was a positive relationship among investor’s behavioral traits as well as behavioral perceptions, as well as the personality characteristics of investment companies that impacted their tolerance levels to potential risk.

A structural equation model of financial risk tolerance in South Africa

Modelling investor behaviour in the South African context is important for investment companies to profile their clients. Various factors can influence the risk tolerance of investors. For the purp...

The Capitalization Effect of Imputation Credits on Expected Stock Returns

This paper develops an equilibrium model featuring heterogeneity in investor risk tolerance across different risk sources. Using Australian data, it confirms the theoretical predictions of the model, by showing that a higher imputation credit yield in one year leads to a lower stock return in the next year, and this negative relationship between imputation credit yield and stock return is weaker for stocks with higher idiosyncratic risk, of larger size and with a higher trading turnover. Our theoretical and empirical evidence favours the aggregation approach in explaining the capitalization effect of imputation credits over the marginal investor approach.

Risk awareness enabled sizing approach for hybrid energy storage system in distribution network

This study presents a bi-level optimal sizing approach for hybrid energy storage system (HESS) in distribution network with high share of renewable energy. Differently from the traditional planning methods, the proposed two-level approach can evaluate the investment risks caused by wind power uncertainty. In particular, the upper level describes the financial composition associated with HESS devices investment cost. The lower level searches optimal operation strategies for the minimal cost of each scenario set. The upper-level and lower level models are bridged by CVaR, which measures the conditional tail expectation of lower level costs for the entire scenarios and are involved as the additional item of the upper objective. Moreover, to improve solution efficiency, some of the mathematics transformations including second-order cone programming are adapted to transform the holistic non-linear model into the more effective pattern that can be computed by the commercially available solver. The proposed method can compute the corresponding energy storage capacity based on the assessment of the risk tolerance of investors. Finally, a test system is used to validate the effectiveness of the proposed approaches.

Financial Advice, Wealth and Gender: Risk Tolerance, Knowledge and Confidence

We examine how gender differences in investment risk tolerance, knowledge, confidence and portfolio cash allocations relate to the gender mix of investors and financial advisors among a sample of wealthy individuals in the UK. Our results demonstrate that gender effects are more nuanced than previously assumed. First, while even wealthy women consider themselves more conservative and allocate a higher proportion of their investable assets to cash than men, previous findings of lower investment knowledge and confidence do not extend to our sample. Second, having an advisor matters. Advised investors perceive themselves to have a higher risk tolerance and invest 10.6%-points more than self-directed investors. Finally, the investor-advisor gender combination matters, but only for female investors. Women with male advisors are more risk averse, feel less knowledgeable and less confident about their investment decisions. They also invest 11%-points less than women with female advisors. Indeed, female investors advised by women report the highest risk tolerance and make the lowest portfolio allocation to risk-free assets across the full sample, including men.

The Effect of Demographic Factors on Investor’s Risk Tolerance using Fuzzy Analytic Hierarchy Process

This paper attempts to achieve three objectives, first: to investigate the effect of demographic factors of the investor (age, gender, number of dependents, level of education, occupation, average monthly income, investment experience and net wealth) on investor’s risk tolerance using FAHP. Second: to identify the difference or agreement between the results of AHP and those of FAHP. Finally: to identify the difference or agreement between investor’s risk tolerance calculated by the expert (using the suggested model) and those estimated by the investor. Results show that all indicated demographic factors may affect investor's risk tolerance, where middle-aged, male, small numbers of dependents, high qualification, business owner, high-income, long-term investment experience and High-net wealth are more risk tolerance than others. Beside, findings indicate that there is no significant difference between the results of FAHP and those of AHP, and that there is no significant difference between the risk tolerance levels calculated by the expert (using the suggested model) and those estimated by the investor.

Portfolio composition and critical line: a methodological approach

The purpose of this paper is to illustrate, at least pedagogically, composition of an efficient portfolio. Principally, two scenarios are examined. In the first we intend to minimise the portfolio variance and achieve a desired level of return. To do so, we find the optimal weights using Lagrange multiplier method. Short sales of securities are allowed. This implies that negative weights can be found. In the second case, we obtain the optimal portfolio composition, considering that weights cannot be negative. This suggests that short sales of securities are not allowed, and the Kuhn-Tucker system is used. Results are examined in the light of the investor's risk tolerance, and reveal that an investor who chooses an aggressive investment is focused more on return rather than risk. Conversely, when the investor's risk tolerance decreased, funds were invested more in stocks with both lower return and risk.

Portfolio composition and critical line: a methodological approach

The purpose of this paper is to illustrate, at least pedagogically, composition of an efficient portfolio. Principally, two scenarios are examined. In the first we intend to minimise the portfolio variance and achieve a desired level of return. To do so, we find the optimal weights using Lagrange multiplier method. Short sales of securities are allowed. This implies that negative weights can be found. In the second case, we obtain the optimal portfolio composition, considering that weights cannot be negative. This suggests that short sales of securities are not allowed, and the Kuhn-Tucker system is used. Results are examined in the light of the investor's risk tolerance, and reveal that an investor who chooses an aggressive investment is focused more on return rather than risk. Conversely, when the investor's risk tolerance decreased, funds were invested more in stocks with both lower return and risk.

Problems and Suggestions for Private Equity Funds

With the rapid development of China’s social economy, in order to meet the diverse investment needs and risk tolerance of investors, private equity investment funds have emerged in the market. This paper finds that while private equity funds continue to grow and develop, there are also many problems, such as the weak legal system of private equity funds, market manipulation risks, external environmental risks and regulatory defects. These defects not only infringe the interests of investors. It will also disrupt the stability of the entire capital market. This article will make some suggestions based on the fund itself, the formulation of laws and the behavior of the regulatory authorities, so that the development of private equity funds in China is more in line with the requirements of the market and laws and regulations.

Subjective Risk Tolerance of South African Investors

In general, the amount of risk an individual is willing to tolerate can be influenced by demographic factors. However, needs for research arise as to whether demographic factors influence the amount of risk investors in South Africa are willing to tolerate. The survey was conducted in 2017 and all South African investors were included in the sample frame. For this study, a sample of 800 was collected and used. Multinomial regression was used to indicate whether there were more than two factors that can influence the four risk tolerance levels of South African investors. The study suggested that gender is a determining factor in the risk tolerance of individuals. African investors were more likely to take the substantial financial risk. Age was also a determining factor of risk tolerance which follows the assumptions of the investor lifecycle where younger investors are more risk tolerant. The study furthermore found that higher annual income attracts more risk-taking while lower-income attracts more risk averseness in individuals. It was lastly observed that married individuals and those that are no longer married will be more likely to be risk-averse. This study makes a significant contribution in profiling investors risk tolerance according to their demographic factors whereby financial institutions can offer more tailored investment options.

Subjective Risk Tolerance of South African Investors

In general, the amount of risk an individual is willing to tolerate can be influenced by demographic factors. However, needs for research arise as to whether demographic factors influence the amount of risk investors in South Africa are willing to tolerate. The survey was conducted in 2017 and all South African investors were included in the sample frame. For this study, a sample of 800 was collected and used. Multinomial regression was used to indicate whether there were more than two factors that can influence the four risk tolerance levels of South African investors. The study suggested that gender is a determining factor in the risk tolerance of individuals. African investors were more likely to take the substantial financial risk. Age was also a determining factor of risk tolerance which follows the assumptions of the investor lifecycle where younger investors are more risk tolerant. The study furthermore found that higher annual income attracts more risk-taking while lower-income attracts more risk averseness in individuals. It was lastly observed that married individuals and those that are no longer married will be more likely to be risk-averse. This study makes a significant contribution in profiling investors risk tolerance according to their demographic factors whereby financial institutions can offer more tailored investment options.

The Investment Risk Tolerance Assessment: A Resource for Extension Educators

This article provides a brief review of investment risk tolerance, clarifications of terms used to describe risk attitudes, and a description of an online tool, the Investment Risk Tolerance Assessment (IRTA). The IRTA is a research-based tool that provides a score indicating a personalized analysis of a user's willingness to take financial risk. Extension educators can add value to the lives of their clientele by providing assistance in assessing risk tolerance in a valid and reliable manner. For this reason, the IRTA should be a useful addition to Extension educators' toolboxes.