Featured Research

from universities, journals, and other organizations

How Much Risk Can You Handle? Making Better Investment Decisions

Date:
August 26, 2008
Source:
University of Chicago Press Journals
Summary:
Many Americans make investment decisions with their retirement funds. But they don't always make informed judgments. A new study introduces a new tool that investors can use to choose investments based on their financial goals and risk attitudes.

Many Americans make investment decisions with their retirement funds. But they don't always make informed judgments. A new study in the Journal of Consumer Research introduces a new tool that investors can use to choose investments based on their financial goals and risk attitudes.

Related Articles


Authors Daniel G. Goldstein (London Business School), Eric J. Johnson (Columbia University), and William F. Sharpe (Stanford University) developed a tool, which they call the Distribution Builder. With brief training, people can use the Distribution Builder to better understand their investment goals and trade-offs.

"We think that the Distribution Builder can function like a flight simulator, allowing investors to explore the outcomes of their decisions with only virtual outcomes," write the authors.

The Distribution Builder is an online tool that estimates the level of risk a user considers unacceptable in his or her investments by using a probability distribution. Since many employees make retirement investment decisions without understanding the complex picture of their own risk preferences, the Distribution Builder is a novel way for people to uncover their preexisting preferences. And, according to the researchers, it can also help people construct better preferences.

The researchers claim that by using the tool, investors can become more actively involved in the process of deciding where and how much to invest. They also believe investment management companies could use the tool to better serve their investors.

The Distribution Builder may have applications that reach beyond retirement investments. "Beyond financial services, the basic DB framework could be used to study other consumer choices in which there is a risk-reward tradeoff, including waiting times at health clinics (or on customer support lines), delivery times of packages, and overage charges for mobile-phone plans," they conclude.


Story Source:

The above story is based on materials provided by University of Chicago Press Journals. Note: Materials may be edited for content and length.


Journal Reference:

  1. Daniel G. Goldstein, Eric J. Johnson, and William F. Sharpe. Choosing Outcomes versus Choosing Products: Consumer‐Focused Retirement Investment Advice. Journal of Consumer Research, 2008; DOI: 10.1086/589562

Cite This Page:

University of Chicago Press Journals. "How Much Risk Can You Handle? Making Better Investment Decisions." ScienceDaily. ScienceDaily, 26 August 2008. <www.sciencedaily.com/releases/2008/08/080822160349.htm>.
University of Chicago Press Journals. (2008, August 26). How Much Risk Can You Handle? Making Better Investment Decisions. ScienceDaily. Retrieved April 21, 2015 from www.sciencedaily.com/releases/2008/08/080822160349.htm
University of Chicago Press Journals. "How Much Risk Can You Handle? Making Better Investment Decisions." ScienceDaily. www.sciencedaily.com/releases/2008/08/080822160349.htm (accessed April 21, 2015).

Share This


More From ScienceDaily



More Science & Society News

Tuesday, April 21, 2015

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Labour Party Warns Britain's Health Service 'on Life Support'

Labour Party Warns Britain's Health Service 'on Life Support'

AFP (Apr. 20, 2015) Britain&apos;s opposition Labour Party Monday claimed the National Health Service (NHS) was &apos;on life support&apos; as it turned its attention to the state-run service, which is a key issue for the UK&apos;s May 7 general election. Video provided by AFP
Powered by NewsLook.com
Pending Comcast-Time Warner Merger Has DOJ, FCC Concerned

Pending Comcast-Time Warner Merger Has DOJ, FCC Concerned

Newsy (Apr. 20, 2015) The Department of Justice reportedly has concerns a Time Warner-Comcast merger would create an entity too large in the cable and broadband markets. Video provided by Newsy
Powered by NewsLook.com
Five Years Later, the BP Oil Spill Is Still Taking Its Toll

Five Years Later, the BP Oil Spill Is Still Taking Its Toll

AFP (Apr. 20, 2015) On April 20, 2010, an explosion and fire on the Deepwater Horizon rig in the Gulf of Mexico started the biggest oil spill in US history. BP recently reported the Gulf is recovering well, but scientists paint a different picture. Duration: 02:36 Video provided by AFP
Powered by NewsLook.com
Thai Customs Seize African Elephant Tusks Worth $6 Mn

Thai Customs Seize African Elephant Tusks Worth $6 Mn

AFP (Apr. 20, 2015) Thai customs seize four tonnes of African elephant ivory worth $6 million at a Bangkok port in a container labelled as beans. Duration: 00:47 Video provided by AFP
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:

Strange & Offbeat Stories


Science & Society

Business & Industry

Education & Learning

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins