RIsk SCreening on the Financial Market (RISC-FM): A tool to assess investors’ financial risk tolerance

Wahl, Ingrid; Kirchler, Erich

doi:10.1080/23311908.2020.1714108

Cited by 17 publications

(16 citation statements)

References 58 publications

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“…The concept of multidimensional risk was first introduced by Cordell (2001), who classified risk tolerance into various multidimensional constructs, including risk propensity, risk attitude, risk capacity and risk knowledge. Many researchers have since developed the concept in assessing risk tolerance (Holzhauer, Lu, McLeod, & Wang, 2016;Wahl & Kirchler, 2020). Generally, scholars define risk tolerance as the maximum amount of uncertainty someone is willing to accept when making a financial decision (Grable & Joo, 2004).…”

Section: Multidimensional Riskmentioning

confidence: 99%

“…We also added additional questions about sharia investment attractiveness. In Sections 3 to 6, the respondents provided information related to a self-evaluation of their risk propensity, risk attitude, risk capacity and risk knowledge using the Risk Screening on the Financial Market (RISC-FM) scale adopted from Wahl and Kirchler (2020). These sections also included additional questions using a risk tolerance scale; for risk propensity this was adopted from Alleyne and Tracey (2011), and for risk capacity it was adopted from Injodey and Alex (2011).…”

Section: Research Instrumentmentioning

confidence: 99%

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Multidimensional Risk and Religiosity Towards Indonesian Muslims’ Sharia Investment Decision

Lestari

Ginanjar²,

Warokka

2021

JIMF

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The decision-making process for Sharia investment needs to consider the individual’s risk tolerance since every type of investment is closely attached to the risk-return trade-off. This study examines whether multidimensional risk tolerance and religiosity influence Sharia investment decisions. The study used 300 potential Muslim investors in Indonesia as the primary data source through an online survey with a convenience sampling method and analysed the data using Partial Least Squares Structural Equation Modelling (PLS-SEM). The results show that three multidimensional risks (risk propensity, risk attitude and risk capacity) have a significant effect on the Sharia investment decision. The research also tested the moderating effect of religiosity levels by performing Multi-Group Analysis (MGA) and found significant differences between risk propensity and sharia investment decisions among moderate and devout religious individuals.

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Section: Multidimensional Riskmentioning

confidence: 99%

Section: Research Instrumentmentioning

confidence: 99%

Multidimensional Risk and Religiosity Towards Indonesian Muslims’ Sharia Investment Decision

Lestari

Ginanjar²,

Warokka

2021

JIMF

View full text Add to dashboard Cite

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“…The time frame of investment plays a key role. In addition, the risk tolerance of investors may be affected by decisionmaking abnormalities such as framework effects and heuristics, or investors may lose control of their emotions when taking financial risks [12]. Therefore, with the improvement of risk tolerance, the positive attitude towards the market gradually increases.…”

Section: Different Investors'reaction To Marketmentioning

confidence: 99%

How Investment Portfolio Reduce the Additional Risks from Investor Sentiment

Duan¹

2022

Proceedings of the 2022 7th International Conference on Financial Innovation and Economic Development (ICFIED 2022)

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The price of stocks is determined by the market, and the relationship between supply and demand affects the fluctuation of stock prices. However, the three main factors driving stock prices to rise or fall are fundamental factors, technical factors and market sentiment. The relationship between the market sentiment and investor sentiment is included. Therefore, this article will focus on the types of market sentiment and how investor sentiment affects the market. For example, when the market dries up, what background conditions will investors affect their risk tolerance? Next, this article will introduce a two-step principal component analysis method to construct an investor sentiment index based on the actual situation in China and the availability of data Sexual selection of five proxy variables. The five proxy variables are the number of newly opened stock accounts, turnover rate, margin balance, net active purchases and investor attention. The analytic method proves that as investor sentiment fluctuates, the five proxy variables will also fluctuate. Therefore, when these five proxy variables fluctuate violently, it proves that the market is also covered by investor sentiment. Finally, this article will use investment portfolios to reduce additional risk factors caused by emotions.

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“…Finke and Guillemette (2016) provides a modern review of eliciting risk tolerance from questionnaires; their summative findings include measuring choices surrounding income risk and volatility to assess risk tolerance (Guillemette et al, 2012), financial literacy effects on risk assessment (Linciano and Soccorso, 2012), and emotional responses to risk and loss aversion (Loewenstein et al, 2001;Grable and Lytton, 2001;Michael et al, 2015). Wahl and Kirchler (2020) employed a modern questionnaire methodology that measures risk propensity, attitude, capacity, and knowledge to elicit risk tolerance from clients. Our dataset described in Section 3 contains the risk elicited using a questionnaire under the KYC obligation guidelines.…”

Section: Behavioural Finance: Elicited and Revealed Riskmentioning

confidence: 99%

Measuring Financial Advice: aligning client elicited and revealed risk

Thompson¹,

Li²,

Reesor³

et al. 2021

Preprint

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Financial advisors use questionnaires and discussions with clients to determine a suitable portfolio of assets that will allow clients to reach their investment objectives. Financial institutions assign risk ratings to each security they offer, and those ratings are used to guide clients and advisors to choose an investment portfolio risk that suits their stated risk tolerance. This paper compares client Know Your Client (KYC) profile risk allocations to their investment portfolio risk selections using a value-at-risk discrepancy methodology. Value-at-risk is used to measure elicited and revealed risk to show whether clients are over-risked or under-risked, changes in KYC risk lead to changes in portfolio configuration, and cash flow affects a client's portfolio risk. We demonstrate the effectiveness of value-at-risk at measuring clients' elicited and revealed risk on a dataset provided by a private Canadian financial dealership of over 50, 000 accounts for over 27, 000 clients and 300 advisors. By measuring both elicited and revealed risk using the same measure, we can determine how well a client's portfolio aligns with their stated goals. We believe that using value-at-risk to measure client risk provides valuable insight to advisors to ensure that their practice is KYC compliant, to better tailor their client portfolios to stated goals, communicate advice to clients to either align their portfolios to stated goals or refresh their goals, and to monitor changes to the clients' risk positions across their practice.

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RIsk SCreening on the Financial Market (RISC-FM): A tool to assess investors’ financial risk tolerance

Cited by 17 publications

References 58 publications

Multidimensional Risk and Religiosity Towards Indonesian Muslims’ Sharia Investment Decision

Multidimensional Risk and Religiosity Towards Indonesian Muslims’ Sharia Investment Decision

How Investment Portfolio Reduce the Additional Risks from Investor Sentiment

Measuring Financial Advice: aligning client elicited and revealed risk

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