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The Determinants of the Risk Perceptions of Investors

The Determinants of the Risk Perceptions of Investors Annie Yates and Colin Firer Graduate School of Business Administration, University of the Witwatersrand, Johannesburg The ultimate test of theory is whether it explains real world Stewart (1991, p 452} developed a risk index based on behaviour. In recent years, serious doubts have arisen as research into 1 000 public US companies, and then to the ability of the Capital Asset Pricing Model (CAPM) to attempted to "identify causal, quantifiable factors that explain investor behaviour. would account for differences in business risk between business peers". He found that five risk factors, namely It has been argued that a study of investor risk perceptions operating risk, strategic risk, asset management, size and will provide a different perspective on the investment and geographic diversification were highly significant. valuation process. The objective of this study was to explore investor risk perceptions and to indentify how In an extensive study of systematic risk in the South investors treat risk in practice. African market, Bergesen (1994} concluded that certain fundamental financial data was strongly correlated to The CAPM presumes that rational investors strive to market beta and market returns. His findings provided maximise wealth, and it seeks to explain the relationship support for the http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Investment Analysts Journal Taylor & Francis

The Determinants of the Risk Perceptions of Investors

Investment Analysts Journal , Volume 26 (44): 9 – Jun 1, 1997
9 pages

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Publisher
Taylor & Francis
Copyright
© 1997 Taylor and Francis Group, LLC
ISSN
2077-0227
eISSN
1029-3523
DOI
10.1080/10293523.1997.11082368
Publisher site
See Article on Publisher Site

Abstract

Annie Yates and Colin Firer Graduate School of Business Administration, University of the Witwatersrand, Johannesburg The ultimate test of theory is whether it explains real world Stewart (1991, p 452} developed a risk index based on behaviour. In recent years, serious doubts have arisen as research into 1 000 public US companies, and then to the ability of the Capital Asset Pricing Model (CAPM) to attempted to "identify causal, quantifiable factors that explain investor behaviour. would account for differences in business risk between business peers". He found that five risk factors, namely It has been argued that a study of investor risk perceptions operating risk, strategic risk, asset management, size and will provide a different perspective on the investment and geographic diversification were highly significant. valuation process. The objective of this study was to explore investor risk perceptions and to indentify how In an extensive study of systematic risk in the South investors treat risk in practice. African market, Bergesen (1994} concluded that certain fundamental financial data was strongly correlated to The CAPM presumes that rational investors strive to market beta and market returns. His findings provided maximise wealth, and it seeks to explain the relationship support for the

Journal

Investment Analysts JournalTaylor & Francis

Published: Jun 1, 1997

References