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: 1 Jul 2021
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: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Does Risk Tolerance Decrease with Age?
By Hui Wang and Sherman D. Hanna
-
Subjective and Objective Risk Tolerance: Implications for Optimal Portfolios
By Sherman D. Hanna and Peng Chen
-
Changes in Financial Risk Tolerance, 1983-2001
By Rui Yao, Sherman D. Hanna, ...
-
The Financial Risk Tolerance of Blacks, Hispanics and Whites
By Rui Yao, Michael S. Gutter, ...
-
The Financial Risk Tolerance of Blacks, Hispanics and Whites
By Rui Yao, Michael S. Gutter, ...
-
Efficient Portfolios for Saving for College
By Sherman D. Hanna and Peng Chen
-
Risk Tolerance and the Investment Behavior of Black and Hispanic Heads of Household