August 2014 Investment Insight, "Defining Risk for Investors"

Abstract

This issue of Investment Insight considers the behavioral aspects of risk, focusing on four common biases that affect investors' ability to optimally manage assets, particularly in times of stress of crisis. It also discusses how the investment industry's tools for measuring and reporting risk, such as the classic "risk/return scatter gram" in performance analytics reports, may in fact not measure what an investor views as risk. The issue concludes with some observations, lessons and suggestions about how to better understand risk and its influence in the investment decision-making process.

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