Click to login and read the full article.
Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600
Abstract
We implement several financial and actuarial methods in order to assess investors’ risk and loss aversion. This article sheds another light on the risk characteristics of U.S. equity markets across different historical periods and their respective implied risk and loss aversion. First, we show that our selected risk measures depend upon market factors such as excess return and volatility. Consequently, for some historical periods, equity markets display implied risk aversion coefficients far below the ones found in previous literature. Furthermore, we investigate to what extent the proportion of risky assets held in one’s portfolio influences our risk measures. We find that the presence of risky assets, even in small proportion to one’s portfolio, still requires substantial tolerance to risk. As a result, we recommend that financial institutions should formalize the assessment of risk aversion quantitatively in order to match their offers with their clients’ individual characteristics.
- © 2014 Pageant Media Ltd
Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600