New Vistas in Risk Profiling

32 Pages Posted: 18 Dec 2017

Date Written: August 1, 2017


Risk profiling is fraught with misunderstandings that lead to ill-advised approaches to determining suitable investment solutions for individuals. The author discusses how we should think about the crucial elements of (a) risk tolerance, (b) behavioural risk attitudes, and (c) risk capacity. He uses a simple thought experiment to examine a stripped-down investor situation and define the essential features and exact role of each of the components of an investor's overall risk profile. He examines options for eliciting and measuring risk tolerance and considers some promising avenues for future methods.

Suggested Citation

Davies, Greg B., New Vistas in Risk Profiling (August 1, 2017). CFA Institute Research Foundation Volume 3, Issue 5,pp. 1-23, August 2017, ISBN: 978-1-944960-23-0. Available at SSRN: or

Greg B. Davies (Contact Author)

Centapse ( email )

6 Clavering Place
London, SW12 8DB
United Kingdom

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