A Study Of Risk Profiling And Investment Choices Of Retail Investor
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| Author | : Dr Kamini Khanna |
| Publisher | : |
| Total Pages | : 10 |
| Release | : 2019 |
| Genre | : |
| ISBN | : |
This research is an attempt to explore the association between various demographical factors, risk profile and investment decision of retail investors. All measures were tested for reliability through computation of Cronbach's Alpha. The Alpha coefficient value was found 0.741 for variables like wealth, risk profile asset class, fixed return, mutual fund return, equity, real estate and gold commodity. Further, the chi-Square and crammer-v statistics has been used to interpreting the association between these factors. And it revealed that the investors do not always behave rationally and their choice of investments is decided by their risk profile and other demographical factors such as age, gender, income, wealth etc. This research is also useful for portfolio managers to construct the right portfolio for the investors according to their needs and preferences.
| Author | : Joachim Klement |
| Publisher | : CFA Institute Research Foundation |
| Total Pages | : 28 |
| Release | : 2015-02-26 |
| Genre | : Business & Economics |
| ISBN | : 1934667943 |
The current standard process of risk profiling through questionnaires is highly unreliable and typically explains less than 15% of the variation in risky assets between investors—mostly because the questionnaires focus on socio-economic variables and hypothetical scenarios. The existing research in risk profiling shows, however, that several factors can provide more accurate and reliable insights into the risk profile of investors. Among these factors are the lifetime experiences an investor has had, the financial decisions made in the past, and the influence of family and friends as well as advisers. By using these factors, practitioners can get a better understanding of their clients’ preferences in order to recommend suitable investment strategies and products.
| Author | : Greg B. Davies |
| Publisher | : CFA Institute Research Foundation |
| Total Pages | : 32 |
| Release | : 2017-08-01 |
| Genre | : Business & Economics |
| ISBN | : 1944960244 |
Risk profiling is fraught with misunderstandings that lead to ill-advised approaches to determining suitable investment solutions for individuals. The author discusses how we should think about the crucial elements of (a) risk tolerance, (b) behavioural risk attitudes, and (c) risk capacity. He uses a simple thought experiment to examine a stripped-down investor situation and define the essential features and exact role of each of the components of an investor's overall risk profile. He examines options for eliciting and measuring risk tolerance and considers some promising avenues for future methods.
| Author | : Joachim Klement |
| Publisher | : CFA Institute Research Foundation |
| Total Pages | : 150 |
| Release | : 2018-05-01 |
| Genre | : Business & Economics |
| ISBN | : 1944960473 |
If risk aversion and willingness to take on risk are driven by emotions and we as humans are bad at correctly identifying them, the finance profession has a serious challenge at hand—how to reliably identify the individual risk profile of a retail investor or high-net-worth individual. In this series of CFA Institute Research Foundation briefs, we have asked academics and practitioners to summarize the current state of knowledge about risk profiling in different key areas.
| Author | : Suyam Praba |
| Publisher | : Meem Publishers |
| Total Pages | : 0 |
| Release | : 2023-07-21 |
| Genre | : |
| ISBN | : 9788830350564 |
Delves into the realm of financial psychology, focusing on the investment choices made by retail investors and the subsequent effects on their investment patterns. The research aims to explore the behavioral aspects that influence decision-making in the realm of investments and how these choices shape the overall investment strategies adopted by individual retail investors. It utilizes a comprehensive research framework to analyze the various psychological factors, cognitive biases, and emotional responses that drive investment decisions among retail investors. By examining these behavioral aspects, the researchers aim to uncover the underlying reasons behind specific investment patterns and their outcomes. Through a combination of surveys, interviews, and data analysis, the study seeks to provide valuable insights into the motivations, risk tolerance, and decision-making processes of retail investors. Additionally, it aims to identify common behavioral biases that might lead to suboptimal investment choices, thereby contributing to the body of knowledge in both finance and psychology. Ultimately, the research endeavors to offer recommendations and strategies to enhance the investment decision-making process of retail investors. By understanding the impact of psychological factors on investment behavior, the study aims to empower individual investors to make more informed and rational choices, ultimately improving their financial outcomes and overall investment performance. This study is a valuable contribution to the field of behavioral finance, bridging the gap between psychological insights and investment practices in the context of retail investors.
| Author | : Dr. Jayashree Bhattacharjee, Dr. Ranjit Singh |
| Publisher | : Notion Press |
| Total Pages | : 181 |
| Release | : 2024-04-26 |
| Genre | : Business & Economics |
| ISBN | : |
As globalization reshapes the financial landscape, the community of retail investors has burgeoned over the past two decades. This expansion, while offering a diverse tapestry of investment options, has also introduced a layer of complexity to the decision-making process. Navigating the inherent risk associated with equity shares, where returns are inherently uncertain, becomes paramount for retail investors. Striking a delicate balance between maximizing returns and minimizing risk becomes the key objective. Investors actively seek instruments that offer either higher returns for the same level of risk or equivalent returns for a lower level, ultimately aiming for optimal risk-adjusted returns. Beyond risk assessment, awareness of equity shares plays a critical role in shaping investor decisions. This book delves into the concepts and theories that underpin awareness and risk perception among retail equity investors. It further sheds light on the awareness and risk perception levels of Indian retail equity investors and explores the impact these have on their investment choices.
| Author | : Amy Hubble |
| Publisher | : |
| Total Pages | : |
| Release | : 2020 |
| Genre | : |
| ISBN | : 9781942713920 |
| Author | : Michael Pompian |
| Publisher | : CFA Institute Research Foundation |
| Total Pages | : 58 |
| Release | : 2016-03-03 |
| Genre | : Business & Economics |
| ISBN | : 193466782X |
This piece examines risk profiling through a behavioral finance lens. Behavioral finance attempts to understand and explain actual investor behavior, in contrast to theorizing about investor behavior. It differs from traditional (or standard) finance, which is based on assumptions of how investors and markets should behave. Much has been written about the tension that exists between the willingness to take risk and the ability to take risk. Risk appetite is the willingness to take risk and risk capacity is the ability to take risk. In the behavioral context, risk appetite and risk capacity are defined in terms of known risks and unknown risks. Irrational client behavior often occurs when a client experiences unknown risks. To aid in the advisory process, advisors can use Behavioral Investor Types to help make rapid yet insightful assessments of what type of investor they are dealing with before recommending an investment plan. With a better understanding of behavioral finance vis-à-vis risk taking, practitioners can enhance their understanding of client preferences and better inform their recommendations of investment strategies and products.
| Author | : John E. Grable |
| Publisher | : CFA Institute Research Foundation |
| Total Pages | : 27 |
| Release | : 2017-06-30 |
| Genre | : Business & Economics |
| ISBN | : 1944960201 |
This content provides financial analysts, investment professionals, and financial planners with a review of how financial risk-tolerance tests can and should be evaluated. It begins by clarifying terms related to risk taking and is followed by a broad overview of two important measurement terms: validity and reliability. It concludes with examples for practice.
| Author | : Matthias Burghardt |
| Publisher | : Springer Science & Business Media |
| Total Pages | : 170 |
| Release | : 2011-03-16 |
| Genre | : Business & Economics |
| ISBN | : 3834961701 |
Using a unique data set consisting of more than 36.5 million submitted retail investor orders over the course of five years, Matthias Burghardt constructs an innovative retail investor sentiment index. He shows that retail investors’ trading decisions are correlated, that retail investors are contrarians, and that a profitable trading strategy can be based on these aggregated sentiment measures.
