Most investors need
to take more risks in their financial investments.
Current financial service culture is
weighted toward providing conservative solutions to people's
investment needs but researchers from the University of Warwick's
Institute of Applied Cognitive Science have devised a new method of
obtaining a very precise understanding of a consumer's tolerance of
risk. Professor Nick Chater and Dr Neil Stewart have developed a
new theory of how people make risky decisions.
The researchers are developing models
of "financial personalities" which give a much better understanding
of how people's decision-making processes work. They will also
explore how consumers are influenced by the contexts in which they
take financial decisions. This will help people to improve their
financial decisions and banks to improve their services.
By helping people make decisions that
match more closely their real level of tolerance of risk,
individuals come to much less conservative assessments of which
financial products are best for them and analysts believe that, if
widely used, the resultant increased level of confidence in risk
taking could substantially boost financial markets.
Most investors need
to take more risks in their financial investments.