The Concept of Risk Tolerance in Personal Financial Planning

Hanna, S. D., Waller, W., & Finke, M. (2008). The concept of risk tolerance in personal financial planning. Journal of Personal Finance, 7 (1), 96-108.

19 Pages Posted: 8 Sep 2011 Last revised: 14 Jun 2015

See all articles by Sherman D. Hanna

Sherman D. Hanna

Ohio State University (OSU)

William Waller

Tulane University - Finance & Economics

Michael S. Finke

The American College

Date Written: September 6, 2011

Abstract

Assessment of risk tolerance is fundamental to proper asset allocation within a household portfolio. It is also a frequently misunderstood concept and difficult to measure practically. We discuss the relationship between risk aversion and portfolio recommendations based on an expected utility approach, review selected empirical research on risk tolerance, and propose to separate risk capacity, expectations, and other factors from the concept of risk tolerance.

Keywords: risk tolerance, financial planning, household finance

JEL Classification: D11

Suggested Citation

Hanna, Sherman D. and Waller, William and Finke, Michael S., The Concept of Risk Tolerance in Personal Financial Planning (September 6, 2011). Hanna, S. D., Waller, W., & Finke, M. (2008). The concept of risk tolerance in personal financial planning. Journal of Personal Finance, 7 (1), 96-108. . Available at SSRN: https://ssrn.com/abstract=1923409 or http://dx.doi.org/10.2139/ssrn.1923409

Sherman D. Hanna

Ohio State University (OSU) ( email )

1787 Neil Avenue
Campbell 265D
Columbus, OH 43210
United States
614-292-4584 (Phone)

William Waller

Tulane University - Finance & Economics ( email )

A.B. Freeman School of Business
7 McAlister Drive
New Orleans, LA 70118
United States

Michael S. Finke (Contact Author)

The American College ( email )

Bryn Mawr, PA 19010
United States

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