Risk tolerance and asset allocation for investors nearing retirement

By G. Hariharan, Kenneth S. Chapman, Dale L. Domian. 2000

152 citations recorded by the source corpus.

Abstract This paper uses a large individual-level data set to isolate the effects of risk tolerance on portfolio composition. We test and confirm two predictions of the Capital Asset Pricing Model: (1) increased risk tolerance reduces an individual’s propensity to purchase risk-free assets; and (2) higher risk tolerance does not affect the composition of an individual’s portfolio of risky assets. More specifically, we find that risk tolerant investors nearing retirement do not reduce their bond allocations in order to buy more stock.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/782f7a61d498f251dbed7b5c32c3a5b3be4cce07

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In Accounting

1. Nadya Septi Nur Aini
2. Lutfi Lutfi
3. Thomas M. Zellweger
4. Alfredo De Massis
5. Franz Willi Kellermanns

In Economics and Econometrics

1. Sascha Füllbrunn
2. Nadya Septi Nur Aini
3. Catherine C. Eckel
4. Lutfi Lutfi
5. Thomas M. Zellweger
6. René Bekkers

In Finance

1. Željko Šević
2. Sascha Füllbrunn
3. Dimitrios Kourtidis
4. Nadya Septi Nur Aini
5. Catherine C. Eckel
6. Lutfi Lutfi
7. Prodromos D. Chatzoglou
8. Thomas M. Zellweger

Citations in the corpus

• The influence of risk perception, risk tolerance, overconfidence, and loss aversion towards investment decision making (2019, background): “However, a person with high risk tolerance approaching retirement does not reduce investment in low-risk assets, such as bonds, to be transferred to high-risk assets such as stocks (Hariharan et al., 2000).”
• Time Horizon, Costs of Equity Capital, and Generic Investment Strategies of Firms (2007, background): “In a test of this prediction, Hariharan, Chapman, and Domian (2000) find that a person’s risk tolerance and time, measured by the time span until retirement, play no role in the composition of the risky asset.”
• Influence of future time perspective, financial knowledge, and financial risk tolerance on retirement saving behaviors (2005, result): “Similar findings emerge from studies that focus on retirement investments (Bajtelsmit, Bernasek & Jianakoplos, 1999; Hariharan, Chapman & Domian, 2000; Sunden & Surette, 1998).”
• Investors’ trading activity: A behavioural perspective and empirical results (2011, background): “Furthermore, Hariharan et al. (2000) have investigated the behaviour of investors who are about to retire and they have found that women are more likely to invest in risk-free securities than men.”
• Thar SHE Blows? Gender, Competition, and Bubbles in Experimental Asset Markets† (2015, background): “1 Women investors tend to invest more often in risk-free assets (Hariharan et al. 2000), choose less risky investment portfolios (Jianakoplos and Bernasek 1998), and have a lower tolerance for financial risk than men (Barsky et al.”