An Empirical Analysis of the Risk-Return Preferences of Individual Investors

Baker, H. Kent; Hargrove, M B; Haslem, John A.

doi:10.2307/2330541

Cited by 45 publications

(37 citation statements)

References 23 publications

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“…Consistent with the focus on investors' pre-purchase investment preferences, inclinations and motivations; we examine Indian individual investors' preinvestment (ex-ante) risk preferences through their self-reported general risk attitude. This conception of risk is broadly similar to that of Baker et al (1977) and Cohn et al (1975). Both Kapteyn and Teppa (2002) and Dorn and Huberman (2005) suggest that risk-related measures based on subjective risk-related statements (our approach in this paper, using riskrelated constructs/statements adapted from Baker et al, 1977) are better at explaining investor behaviour as compared to assumptions of risk appetite based on objective attributes such as age, gender and income.…”

Section: Risk Propensitymentioning

confidence: 68%

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Psychological Tendencies in an Emerging Capital Market: A Study of Individual Investors in India

Pandit¹,

Yeoh²

2014

jda

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Recent findings in the finance and consumer behaviour literature have shown that investors' investment decisions are likely to be affected by their psychological tendencies. The focus of this paper is to understand how investors' psychological tendencies influence purchase postponement of shares. Furthermore, the moderating effects of product involvement on the relationship between psychological tendencies and also purchase postponement are examined. Using a survey research design, data was collected from Indian investors to empirically test the model using moderated regression analysis. Our findings show that investor's psychological tendencies do significantly impact purchase postponement. Furthermore, a profile of Indian retail investors is presented in the paper. Our findings documents another distinct phenomenon of investors' persistent departures from rationality as posited by behavioural finance and also provides a better understanding of the nature of individual investor participation in the Indian capital market.JEL Classifications: O19, F15, B28

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Section: Risk Propensitymentioning

confidence: 68%

“…There is a perceived trade-off between risk and return (Baker et al, 1977). Hence, the greater the amount of risk that an investor is willing to take on, the greater is the corresponding expected returns.…”

Section: Risk Propensitymentioning

confidence: 99%

Psychological Tendencies in an Emerging Capital Market: A Study of Individual Investors in India

Pandit¹,

Yeoh²

2014

jda

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“…This unrealized expectation constitutes what is referred to in financial parlance as investment risk (Maranjian, 2013). (Baker et al, 1977) argue that investors behave rationally, taking into account the investment's risk/return tradeoff. There tend to be positive correlation between risks and returns in actuality, however people often perceive that the opposite relationship exists (Fischhoff et al, 1978;Akami & Slovic, 1994;Ganzach, 2000;Hung et al, 2010).…”

Section: Risk and Costmentioning

confidence: 99%

Review of Stock Markets’ Reaction to New Events: Evidence from Brexit

Quaye¹,

Mu²,

Abudu³

et al. 2016

JFRM

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Several studies have evolved to deal with the determinants of stock market volatility. However, there exists a gap in literature with regards to the interrelation among the broad categories of factors that trigger stock market reaction namely company fundaments, technical factors and market sentiments. This paper provides a holistic and comprehensive theoretical review of drivers of stock markets' reaction as well as designs an interrelated conceptual framework of the factors that influence investors' decision making to fill the gap in literature. Brexit is presented as a case study to illustrate how investors and stock markets are affected by new events or information. This study will reveal some of the global staggering effects of Brexit at the end of trading on June 24, 2016 in areas such as currencies, stock markets, banks, commodities, bonds, automakers and homebuilders as well as hedge fund. Barely 24 hours after the results of Brexit were declared; global stock markets lost about $2 trillion in value. The British pound plunged to almost $1.33, its lowest level in over 30 years against the US dollar and gold proved to be one of the few safe havens for investors on that day. In order for investors to insulate themselves against loses from Black Swans events, the conclusion of this study recommends some protective mechanisms for investors which include avoidance of overexposure and stockpiling of cash.

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“…For example, work by [1] showed that the investment strategy is to balance between return and risk and choose the investment that has the highest return under given risk. When it comes to the particularly tensive period with uncertainty and a heavy responsibility of investment capital, [2] demonstrated that fund managers as being one of under performance was the main risk, followed by price volatility and market price losses.…”

Section: Introductionmentioning

confidence: 99%

A Behavioral Finance Analysis on ETF Investment Behavior

Kenneth

et al. 2014

2014 Seventh International Joint Conference on Computational Sciences and Optimization

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Since the global financial tsunami, Exchange Traded Funds have attracted much attention, as investors are increasingly concerned with the underlying risk exposure and transparency in their investments. However, much is yet to be learned about its behavioral characteristics, in addition to the traditional risk and return factors. In this paper, we take a behavioral finance perspective to investigate additional behavioral factors during the ETF investment process. We have found some behavioral characteristics, that are unique for the ETF investment and the Hong Kong regions.

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An Empirical Analysis of the Risk-Return Preferences of Individual Investors

Cited by 45 publications

References 23 publications

Psychological Tendencies in an Emerging Capital Market: A Study of Individual Investors in India

Psychological Tendencies in an Emerging Capital Market: A Study of Individual Investors in India

Review of Stock Markets’ Reaction to New Events: Evidence from Brexit

A Behavioral Finance Analysis on ETF Investment Behavior

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