Questionnaires of Risk Tolerance, Regret, Overconfidence, and Other Investor Propensities

10 Pages Posted: 22 Sep 2012

See all articles by Carrie H. Pan

Carrie H. Pan

Santa Clara University - Department of Finance

Meir Statman

Santa Clara University - Department of Finance

Date Written: August 1, 2012

Abstract

The crisis of 2008 and 2009 exposed not only the shortcomings of our financial system but also the shortcomings of the tools used by financial advisors to assess and guide investors. These include risk questionnaires. Many investors who were assessed as risk tolerant in 2007 and assigned portfolios heavy in equities dumped their equities in 2008 and 2009 and some even dumped their advisors. In this paper, we attempt to examine the assessment of investors’ risk tolerance and what, beyond investors’ risk tolerance, should be assessed.

Keywords: Risk tolerance, Overconfidence, Hindsight, Regret, Trust, Maximization, Portfolio Theory, Behavioral Finance, Financial Advisors

JEL Classification: D81, G00, G11

Suggested Citation

Pan, Carrie H. and Statman, Meir, Questionnaires of Risk Tolerance, Regret, Overconfidence, and Other Investor Propensities (August 1, 2012). Journal of Investment Consulting, Vol. 13, No. 1, 54-63, 2012. Available at SSRN: https://ssrn.com/abstract=2144481

Carrie H. Pan (Contact Author)

Santa Clara University - Department of Finance ( email )

Santa Clara, CA 95053
United States
(408)5517188 (Phone)

Meir Statman

Santa Clara University - Department of Finance ( email )

500 El Camino Real
Santa Clara, CA 95053
United States
408-554-4147 (Phone)
408-554-4029 (Fax)

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