Risk Preferences of Small Private Investors: The Role of Dispositional Tendency and Aspirations

Joanna Sokołowska , Piotr Makowiec


In the dominant approach, it is assumed that risk preferences reflect the shape of utility function. Here, the alternative approach is, in which risk preferences are result of: (1) individual differences in focus on either potential or security that impacts decision weights put to good and bad outcomes and (2) aspirations that impact the trade-off between risk and return. In line with this approach: (1) individuals focused on potential are more risk prone than those focused on security and (2) investors, who have high aspirations are risk seeking. Sensation-seeking scale was used as a proxy for the security/potential focus. It was expected that investors with high need for sensation seeking would be more risk prone than those with a low need for sensation seeking. As for aspirations, it was expected that investors set high aspirations in a bull market and low aspirations in a bear market. Thus, they are risk avoiding in a bear market and risk seeking in a bull market. These hypotheses were supported in an experiment carried out via the Internet with small private investors (N=292).
Author Joanna Sokołowska (Wydział Psychologii)
Joanna Sokołowska,,
- Wydział Psychologii
, Piotr Makowiec
Piotr Makowiec,,
Journal seriesJournal of Behavioral and Experimental Economics, ISSN 2214-8043, (A 15 pkt)
Issue year2015
Publication size in sheets1.5
Keywords in Englishbear and bull markets, risk preferences, aspirations, sensation-seeking, SP/A model, Behavioral Portfolio Theory, efficient frontier
ASJC Classification3300 General Social Sciences; 2002 Economics and Econometrics; 3202 Applied Psychology
URL https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2725734
Languageen angielski
SSRN-id2725734.pdf 1.04 MB
Score (nominal)15
Publication indicators Scopus SNIP (Source Normalised Impact per Paper): 2015 = 0.637; WoS Impact Factor: 2015 = 0.34 (2) - 2015=0.34 (5)
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