Identifying key factors influencing individual investor’s decision to make portfolio choices is important to understand their different investment behavior. This paper explores individual investor’s preference for portfolio choices and provisionally investigates impacts of risk tolerance and risk perception on their investment decision. Specifically we decide socio- economic status difference in investment preference for portfolio choices with respect to investor’s age, income level. Using chi-square analysis on investment experiments to obtain some evidences from a sample of 200 respondents in survey; our results indicate that investor’s decisions to make their portfolio choices are significantly and negatively related to personal income level. This finding implicates that investor with higher risk tolerance level shows higher likelihood to make their investment decision on portfolio choices it is found that male investor demonstrates much preference on portfolio choices with higher percentage of total return. Keywords:Portfolio Management, Risk Perception, EquityInvestors, Risk Management. Introduction
Portfolio management concerns the constructions and maintenance of a collection of investment. It is investment of funds in different securities in which the total risk of the portfolio is minimized, while expec t ing ma ximum re t ur n fro m it. It primarily involves reducing risk rather than increas ing ret ur n. Re t ur n is ob vio us ly important though, and the ultimate objective of portfolio manager is to achieve a chosen level of return by incurring the least possible risk.
Determinants of risk attitudes of individual investors are of great interest in a growing area of finance known as behavioral finance. Behavioral finance foc uses o n t he ind ivid ua l at tr ib utes, Psyc ho lo gica l o r ot her w is e, t hat s hape common financial and investment practices. Unlike traditional assumptions of expected utility maximization with rational...
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