Perception of Financial Risk: A Survey Study of Advisors and Planners

Journal of Financial Planning, 1999

12 Pages Posted: 11 Jun 2011

See all articles by Donald G. MacGregor

Donald G. MacGregor

MacGregor-Bates, Inc.

Paul Slovic

Decision Research; University of Oregon - Department of Psychology

Michael Berry

affiliation not provided to SSRN

Harold Evensky

Texas Tech University; Evensky & Katz Wealth Management

Date Written: September 1, 1999

Abstract

Financial advisors are continually faced with the challenge of evaluating the quality of financial investments. Previous research has indicated that even among researchers of financial markets, diverse views exist about the meaning of risk and its relationship to returns. A survey study of 265 financial advisors and planners was undertaken to develop a deeper understanding of how financial judgment is related to other characteristics of asset classes, particularly perceptions of their risks, returns and return/risk relationships. Risk-related dimensions included volatility, investment time horizon, performance predictability, knowledge level and overall perceived risk. Return-related dimensions included overall perceived return, return/risk ratio and one & ten year rate of return. The results indicated a strong correlation between perceived risk and return, consistent with finance theory. However, a more complex, curvilinear picture emerged with respect to the relationship between perceived risk and perceived return/risk. The findings suggest that among financial advisors, risk can take on a variety of meanings when the concept is applied to evaluating different asset classes.

Suggested Citation

MacGregor, Donald G. and Slovic, Paul and Berry, Michael and Evensky, Harold, Perception of Financial Risk: A Survey Study of Advisors and Planners (September 1, 1999). Journal of Financial Planning, 1999. Available at SSRN: https://ssrn.com/abstract=1860403

Donald G. MacGregor (Contact Author)

MacGregor-Bates, Inc. ( email )

1010 Villard Ave.
Cottage Grove, OR 97424
United States
(541) 942-5727 (Phone)

Paul Slovic

Decision Research ( email )

1201 Oak Street, Suite 200
Eugene, OR 97401
United States
541-485-2400 (Phone)
541-485-2403 (Fax)

HOME PAGE: http://www.decisionresearch.org

University of Oregon - Department of Psychology ( email )

Eugene, OR 97403
United States
541-485-2400 (Phone)

Michael Berry

affiliation not provided to SSRN ( email )

Harold Evensky

Texas Tech University ( email )

1301 Akron Ave, HS-260
Box 41210
Lubbock, TX 79409-1210
United States

Evensky & Katz Wealth Management ( email )

4000 Ponce de Leon Boulevard
Penthouse
Coral Gables, FL 33146
United States

HOME PAGE: http://www.evensky.com

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