We use cookies on this website in order to provide you with enhanced user experience.

Professional Journal Articles

2010
 
 Effective Use of Technology: Adding Critical Consistencies to the Financial Planning Process
Paul Resnik, Financial Planning Journal (India), December 2010
With reliance on unscientific methods alone, many advisers may fail to help investors understand financial risk appropriately. The essence is to meaningfully establish investors' investment expectations. Today technology is aiding the advisory process by providing more reliable and scientific tools for accurate risk evaluation and for enabling right communications with the clients.
 
 Assessing Risk Tolerance Scientifically
Geoff Davey, Financial Planning Journal (India), September 2010
Today it is generally agreed that planners have a professional, ethical and legal obligation to assess their clients' risk tolerance. However, from that point on there is little agreement about what exactly risk tolerance is and even less on how it should be assessed. Yet these are not two unknowns.
 
 Risk Perception and Risk Tolerance Changes Attributable to the 2008 Economic Crisis: A Subtle but Critical Difference
Michael J. Roszkowski & Geoff Davey, Journal of Financial Service Professionals, July 2010
Roszkowski and Davey examine the effect of the GFC on risk perception and risk tolerance, finding that the former changed significantly while the latter remained largely unchanged and concluding that behavioural change is best attributed to changes in risk perception.
 
 Determinants of Risk Tolerance in the Baby Boomer Cohort
John E. Gilliam, Swarn Chatterjee & Dandan Zhu, Journal of Business & Economics Research, May 2010
This study examined the differences in financial risk tolerance among leading baby boomers and trailing baby boomers. The results of this study found that leading boomers were less risk tolerant than trailing boomers.
 
2009
 
 Nonlinear Linkages Between Financial Risk Tolerance and Demographic Characteristics
Robert Faff, Terrence Hallahan & Michael McKenzie, Applied Economics Letters, 2009 (16)
This paper explores the nonlinear linkage between financial risk tolerance and demographic characteristics. Tests support the nonlinear role of age, income and number of dependents.
 
 Risky Business
Geoff Davey, Journal of Financial Planning (India), July - September 2009
The volatile markets or a gloomy economic outlook, may have given different dimensions to the client’s assessment of risk. Understanding and managing the four primary aspects of risk would help Financial Planners to give a better advice, build stronger relationships and secure their practice.
 
 Time for Another Look at Client Risk Tolerance?
Ed McCarthy, Journal of Financial Planning, February 2009
Ed McCarthy canvasses planners' views on assessing risk tolerance and the effectiveness of those assessments in the current climate. Additionally, the article presents the views of FinaMetrica's co-founder Geoff Davey and Kansas State University's Dr John Grable. (Linked with permission by the Financial Planning Association, Journal of Financial Planning, Feb 09, Ed McCarthy.)
 
 Effect of General Economic Mood on Investor Risk tolerance - Implications for Financial Planning
Lujer Santacruz, Finsia Journal of Applied Finance, 2009 (1)
Lujer Santacruz examines the relationship between investor risk tolerance and general economic mood in the Australian context. The result shows that risk tolerance, as measured by a psychometric test, does not change with general economic mood, as measured by Westpac Melbourne Institute consumer sentiment index (CSI), over the period May 1998 to May 2007. The same result was also found for the All Ords. JASSA issue 1 2009, reproduced with permission of the author and Finsia - Financial Services Institute of Australasia.
 
Older than 2009
 
 On the Linkage between Financial Risk Tolerance and Risk Aversion
Robert Faff, Daniel Mulino & Daniel Chai, The Journal of Financial Research, Spring 2008
This paper reports on a study linking the psychology construct of financial risk tolerance with the finance construct of risk aversion. Financial risk tolerance as measured by a psychometric test was found to be a predictor of risk aversion as measured by lottery experiments involving a $20,000 kitty.
 
 Gender Stereotypes in Advisors' Clinical Judgments of Financial Risk Tolerance: Objects in the Mirror Are Closer than They Appear to Be
Michael J. Roszkowski & John Grable, Journal of Behavioral Finance, Volume 6, Issue 4, 2005
In this US study of 183 financial advisors and 290 of their clients, the advisers’ clinical judgements i.e. their estimates were compared with the clients' actual risk tolerances as measured by a psychometric test. The results confirmed the general inaccuracy of advisers' clinical judgements – a correlation of only .41 with test scores. The results also showed strong evidence of gender stereotyping. The advisers over-estimated the risk tolerance of male clients and under-estimated the risk tolerance of female clients … and this was as true for female advisers as for male advisers. The authors suggest that advisers should not rely on their clinical judgements in satisfying their 'know-the-client' obligations but rather should utilise a valid and reliable test.
 
 An Analysis of the Ability of Individuals to Predict Their Own Risk Tolerance
Robert W. Moreschi, Journal of Business & Economics Research, February 2005
This paper analyses the capability of individuals to accurately estimate risk tolerance. Using a database of respondent answers to a psychometrically valid questionnaire, calculated risk tolerance scores are compared to respondent self-assessed risk tolerance scores. In general, gender and education are the most significant factors in explaining the ability of individuals to accurately forecast their own risk tolerance score.
 
 Insights from Psychology and Psychometrics on Measuring Risk Tolerance
Michael J. Roszkowski, John Grable & Geoff Davey, Journal of Financial Planning, April 2005
This paper, co-written by two US academics, Dr Mike Roszkowski and Dr John Grable, and FinaMetrica's Co-founder, Geoff Davey focuses on the use of questionnaires in assessing risk tolerance. It introduces and illustrates basic concepts of good measurement principles and demonstrates where industry-standard questionnaires fail to measure up.
Linked with permission by the Financial Planning Association, Journal of Financial Planning, Apr 2005, Roszkowski, Grable & Davey, Insights On Measuring Risk Tolerance From Psychology and Psychometrics.
 
 Estimating Risk Tolerance: The Degree of Accuracy and the Paramorphic Representations of the Estimate
Michael J. Roszkowski & John Grable, Association for Financial Counseling and Planning Education, 2005
Using a sample of 386 financial advisors and 458 of their clients, the study sought to determine how effective financial advisors and clients are at estimating risk-tolerance, and to test how well items from a risk tolerance test and demographic information can represent the judgmental process used to formulate these estimates.
 
 Ticking Time Bombs 1999-2004
Geoff Davey, Portfolio Construction Forum Journal, Volume 1, Issue 2, 2004
Geoff Davey, FinaMetrica's Co-Founder, illustrates how the recent bear market, the rise of consumerism and the increased focus on professional standards has emphasised that advisers must both assess their clients' risk tolerance and have regard to those assessments when formulating advice.
 
 An Empirical Investigation of Personal Financial Risk Tolerance
Robert W. Faff, Terrance Hallahan & Michael D. McKenzie, Financial Services Review, 2004 (13)
This paper from finance academics at Monash and RMIT Universities reports on the analysis of 20,000 completed risk profiles from the FinaMetrica database.
 
 Some Guidelines For Financial Planners In Measuring And Advising Clients About Risk Tolerance
Victor J Callan & Malcolm Johnson, Journal of Personal Finance, 2002
This paper (jointly written by the head of the University of Queensland's Business School and a lecturer there, both of whom have degrees in psychology as well as their post-graduate qualifications), provides financial planners with an outline of the key issues to consider in developing an understanding of the risk tolerance of their clients.
 
 Understanding and Assessing Financial risk tolerance: A Biological Perspective
W. V. Harlow & Keith C. Brown, Financial Analysts Journal, November - December 1990
Our understanding of financial risk tolerance can be extended by investigating the role of certain biological and psychological traits in the formation of economic preference.