 When it comes to the crunch: Retail investor decision-making during periods of market volatilityChris Brooks and Louis Williams International Review of Financial Analysis, 2022, vol. 80, issue C Abstract: Attitude to risk questionnaires are widely used by financial advisors to recommend investments of appropriate risk levels to their clients. Yet the usefulness of this instrument to gauge how investors will react when faced with extreme volatility in the values of their assets remains untested. Using realistic scenarios and based on a large-scale survey in the UK, in this study we examine how the investing public reacts to actual portfolio losses. We find that conventional risk tolerance measures are inadequate for determining whether investors would ‘sell out’ or hold their portfolios in such circumstances. On the other hand, we find that past experience, emotions and personality characteristics, including measures of financial self-efficacy and extraversion, are significant predictors of investor reactions to market crashes. Keywords: Retail investors; Risk tolerance; Personality characteristics; Emotions; Financial decisions (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:80:y:2022:i:c:s1057521922000175 DOI: 10.1016/j.irfa.2022.102038 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
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