Risk Tolerance: Don’t Ask Me, I’m in a Bad Mood
Posted: 1 Oct 2018
Date Written: September 28, 2018
The purpose of this poster is to describe a study that was undertaken to determine if an individual’s mood is associated with the individual’s responses to a set of CRRA questions. It was thought that if such an association exists, then it is likely that Loewenstein et al.’s (2001) “risk-as-feelings” hypothesis may be a more appropriate description of the way investors formulate risk preferences compared to a purely analytical model. Further, if an association between mood and CRRA does exist this means that financial planners should take care to evaluate measures of client CRRA in light of client emotional characteristics.
Keywords: risk aversion, risk tolerance, income gambles, constant relative risk aversion
JEL Classification: D14, D81, D9, G11, G41
Suggested Citation: Suggested Citation