Volume 6, Number 4, 2005 Abstracts
© Copyright Erlbaum 2005

Risk Aversion and Personality Type
Greg Filbeck-University of Wisconsin-La Crosse
Patricia Hatfield-Bradley University
Philip Horvath-Bradley University

The finance literature supports an increasing role for behavioral aspects of investment decision-making. Among other factors such as demographics, personality type may influence risk tolerance as well. This paper explores the relationship between personality type dimensions of the Myers-Briggs Type Indicator (MBTI) and the moments approach to individual investor risk tolerance inherent in expected utility theory (EUT). Our study uses survey results to relate ex ante EUT tolerance for variance and skew to MBTI measures. Results indicate that personality type does explain individual ex ante EUT risk tolerance. Our results further suggest that the relationship between personality type and individual ex ante EUT risk tolerance is non-linear in form.

Gender Stereotypes in Advisors' Clinical Judgments of Financial Risk Tolerance: Objects in the Mirror Are Closer than They Appear
Michael J. Roszkowski-LaSalle University
John Grable-Kansas State University

A sample of 183 financial advisors and 290 advisory clients was used to determine the degree of correspondence between advisors' subjective clinical judgments about their clients' financial risk tolerance and the clients' actual financial risk tolerance. The correlation between the estimates and the actual measures was 0.41. It was further determined that advisors overestimated the risk tolerance of men and underestimated the risk tolerance of women. This distortion could not be attributed to income or wealth differences between the males and females.

Orientation Toward Finances: Development of a Measurement Scale
Ellen Loix-Vrije Universieit Brussel
Roland Pepermans-Vrije Universieit Brussel
Cindy Mentens-Vrije Universieit Brussel
Maarten Goedee-Vrije Universieit Brussel
Marc Jegers-Vrije Universieit Brussel

The construct of orientation toward finances has been developed to focus on individual behavioral dispositions related to personal financial management activities. Based on input from different literature sources, we sought to operationalize the construct using items referring to behavioral competencies. This measurement scale has further been tested and analyzed, resulting in two subfactors: Financial Information, and Personal Financial Planning. We obtained acceptable reliability and validity results for both factors through various studies. Cross-validity testing and confirmatory analysis further supported the robustness of the final two-factor measurement scale.

A Behavioral Approach To Efficient Portfolio Formation
Yaz Gulnur Muradoglu-City University
Aslihan Altay-Salih-Bilkent University
Muhammet Mercan-Yapi Kredi Yatirim

This paper investigates the portfolio performance of subjective forecasts given in different forms. In constructing the efficient frontier, we base the expectation formation processes on subjective forecasts and human behavior, rather than on past prices. We construct the efficient portfolios first, using point, interval, and probabilistic forecasts. Next, we compare their performance to portfolios constructed using the standard time series data approach. Subjective forecasts are provided by actual portfolio managers who forecast stock prices on a real-time basis. Our first contribution is to show that the portfolio performance of subjective forecasts is superior to those of standard time series modeling. Our second contribution lies in the fact that we use experts as forecasters, professional fund managers with substantive expertise. Our third contribution is that we investigate the expert subjects' forecasts using point, interval, and probabilistic forecasts, which renders our findings robust to the task format.

Research Elsewhere
Robert A. Olsen-Decision Science Research Institute

Book Reviews
Robert A. Olsen-Decision Science Research Institute