What Are Investors Afraid of? Finding the Big Bad Wolf
Abstract
:1. Introduction
2. Profiling Investors in Terms of Risk Attitude
3. Empirical Investigation
3.1. Preface
3.2. Questionnaire and Sample Relevant Data
3.3. Clustering Methodology
- (1)
- People who know me would describe me as a cautious person.
- (2)
- You have saved enough money for your ideal holiday, and if you lose your job 6 weeks before departure, how would you behave.
- (3)
- I associate the word “risk” with the idea of “opportunity”.
- (4)
- You participate in a television (TV) show where you have to decide between a safe option and several risky options.
- (5)
- You have to take an international flight early in the morning and the recommended check-in time is 90 min before departure. Which is your preferable attitude?
- (6)
- I am concerned by the uncertainty of the stock market investment.
- (7)
- If in six months’ time your pension plan would register a remarkable drop in value, what would you do?
- (8)
- I believe that the best long-term results can be achieved with an aggressive investment strategy and I am willing to accept a considerable and lasting drop in value during the investment period.
- (1)
- I generally look for the safest type of investment, even if that means lower returns.
- (2)
- I feel comfortable about investing in the stock market.
- (3)
- You have a friend who developed an app he is about to launch. There is a 15% chance to succeed and, in that case, the reward is 10 times the capital initially invested. How much would you put into this venture?
- (4)
- I prefer the safety of keeping my money in the bank.
- (1)
- I feel comfortable about investing in the stock market.
- (2)
- I find investment and other financial matters easy to understand.
- (3)
- Did you happen to choose an investment with a strong, while temporary, capital loss? In which case?
- (4)
- I have little experience of investing in stocks and shares.
- (1)
- Usually it takes me a long time to make up my mind on financial matters.
- (2)
- You are given the possibility to choose among several pension plans. How would you behave?
- (3)
- When it comes to investing, I would rather be safe than sorry.
- (1)
- You have to renew your house insurance and you can choose among several mixes of premium and deductible.
- (2)
- Choose among the following min and max returns you could achieve on your portfolio over a one-year investment horizon.
3.4. Segmentation Profiles
4. Concluding Remarks
Author Contributions
Funding
Acknowledgments
Conflicts of Interest
Appendix A
1. | Age |
2. | Gender |
3. | Enrolment year |
4. | Class of manager |
5. | District of residence |
6. | District of work |
7. | Stock of pension fund investment |
8. | Flow to pension fund investment |
9. | Active/not active |
10. | Contractual contribution |
11. | Employer contribution |
12. | Voluntary contribution |
13. | Full/partial Trattamento di Fine Rapporto (TFR) (sewage fund) contribution |
14. | Other voluntary contribution |
15. | Number of switches over the last five years |
Respondents (14,590) | Population (76,207) | ||
Age | Mean | 54 | 53 |
Min | 28 | 23 | |
Max | 80 | 97 | |
Gender | Male | 92.00% | 89.00% |
Female | 8.00% | 11.00% | |
Enrolment year | Ante 2005 | 54.00% | 55.00% |
Post 2004 | 46.00% | 45.00% | |
Active contributors | Active | 71.00% | 60.00% |
Not active | 29.00% | 40.00% | |
Degree of dynamism | Static | 89.00% | 94.00% |
Dynamic | 11.00% | 6.00% | |
Asset allocation (stocks) | Only guarantee | 67.50% | 74.20% |
Only financial | 11.50% | 8.80% | |
Both None | 21.00% | 14.50% 2.50% | |
Asset allocation (2014 flows) | Only guarantee | 69.00% | 77.00% |
Only financial | 14.00% | 10.50% | |
Both | 17.00% | 12.50% |
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1. | One of the two authors would like to disclose that he belongs to this group. |
<20—Low | 20–39—Medium | 40–59—Medium–High | ≥60—High |
---|---|---|---|
9% | 62% | 28% | 1% |
Min Risk | Low Risk | Medium Risk | High Risk | Max Risk |
---|---|---|---|---|
67.5% | 7.5% | 9.0% | 12.8% | 3.2% |
Comfort | Investment | Knowledge | Regret | Loss | |
---|---|---|---|---|---|
Comfort | 1 | ||||
Investment | 0.50 | 1 | |||
Knowledge | 0.41 | 0.48 | 1 | ||
Regret | 0.41 | 0.45 | 0.50 | 1 | |
Loss | 0.30 | 0.31 | 0.28 | 0.31 | 1 |
Characteristic | All Respondents (n = 14,590) | Cluster I—The Alpha Males (n = 3155; 22%) | Cluster II—The Cautious (n = 3905; 27%) | Cluster III—The Static (n = 3537; 24%) | Cluster IV—The Loss Averse (n = 3993; 27%) |
---|---|---|---|---|---|
Age | 53.94 | 51.74 * | 56.13 * | 52.38 * | 54.91 * |
Comfort with risk | 0.3844 | 0.5356 * | 0.2642 * | 0.3695 * | 0.3958 * |
Investment risk | 0.3691 | 0.553 * | 0.2324 * | 0.3484 * | 0.3757 |
Knowledge of risk | 0.473 | 0.701 * | 0.2742 * | 0.364 * | 0.5838 * |
Regret attitude | 0.4871 | 0.7011 * | 0.2887 * | 0.422 * | 0.5699 * |
Loss attitude | 0.3363 | 0.5789 * | 0.142 * | 0.4887 * | 0.1997 * |
Risk taking in asset allocation | 0.2851 | 0.367 * | 0.1896 * | 0.2803 | 0.2632 * |
Dynamism | 0.1077 | 0.142 * | 0.0855 * | 0.078 * | 0.1285 * |
Gender (male) | 92.19% | 96.48% * | 88.58% * | 89.71% * | 94.52% * |
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Alemanni, B.; Uberti, P. What Are Investors Afraid of? Finding the Big Bad Wolf. Int. J. Financial Stud. 2019, 7, 42. https://doi.org/10.3390/ijfs7030042
Alemanni B, Uberti P. What Are Investors Afraid of? Finding the Big Bad Wolf. International Journal of Financial Studies. 2019; 7(3):42. https://doi.org/10.3390/ijfs7030042
Chicago/Turabian StyleAlemanni, Barbara, and Pierpaolo Uberti. 2019. "What Are Investors Afraid of? Finding the Big Bad Wolf" International Journal of Financial Studies 7, no. 3: 42. https://doi.org/10.3390/ijfs7030042
APA StyleAlemanni, B., & Uberti, P. (2019). What Are Investors Afraid of? Finding the Big Bad Wolf. International Journal of Financial Studies, 7(3), 42. https://doi.org/10.3390/ijfs7030042