Risk tolerance and asset allocation for investors nearing retirement

Authors

  • Govind Hariharan School of Management, University at Buffalo, Buffalo, NY 14260, USA
  • Kenneth S. Chapman California State University, Northridge, Northridge, CA 91330, USA
  • Dale L. Domian College of Commerce, University of Saskatchewan, Saskatoon, SK S7N 5A7, Canada

DOI:

https://doi.org/10.1016/S1057-0810(00)00063-9

Keywords:

Risk aversion, Asset allocation, Portfolio choice

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. © 2000 Elsevier Science Inc. All rights reserved.

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Published

2000-06-30

How to Cite

Hariharan, G., Chapman, K. S., & Domian, D. L. (2000). Risk tolerance and asset allocation for investors nearing retirement. Financial Services Review, 9(2), 159–170. https://doi.org/10.1016/S1057-0810(00)00063-9

Issue

Vol. 9 No. 2 (2000): Financial Services Review

Section

New Original Submission

License

Copyright (c) 2000 JAI Press Inc.

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