Risk Tolerance Analysis: Romanian Case Before and During Financial Turmoil

Title: Risk Tolerance Analysis: Romanian Case Before and During Financial Turmoil
Issue: Vol. 5, No 2a, 2012
Published date: 20-07-2012 (print) / 20-07-2012 (online)
Journal: Economics & Sociology
ISSN: 2071-789X, eISSN: 2306-3459
Authors: Paun Cristian
Keywords: risk aversion, behavioural finance, optimal portfolio investments, capital market, investment criteria
DOI: 10.14254/2071-789X.2012/5-2a/2
DOAJ: https://doaj.org/article/65fd99e5e7dc474fb22cd05abbf29651
Language: English
Pages: 11-23 (13)
JEL classification: A13, G12, D53, D81, G01
Website: http://www.economics-sociology.eu/files/E&S_5_2a_guest.pdf
File https://www.economics-sociology.eu/files/E&S_5_2a_guest.pdf

One of the most challenging problems of investment theory is to explain and to understand the risk behaviour of people interested in investing their savings on the stock exchange. The recent global financial crisis significantly affected public perception about the risks and had a direct impact on the transaction volume and type of operations performed on international capital markets. Risk tolerance is considered in crisis theories as one of the major factors inducing global contagion. Social aspects like gender, social status, level of income (wealth) are considered to be relevant for explaining risk tolerance. This research proposed a specific instrument used to test the level of risk aversion (inverse of risk tolerance) applied on the Romanian case in two different periods (before crisis and during crisis) and on a statistically relevant sample of respondents. Using specific tools (non-parametric and parametric instruments), the paper provides a closer insight on this specific problem, trying to explain the significance of different social aspects on the risk aversion level for different categories, but also to explain how the crisis affected this aversion.