Investor Risk/Return Preferences (Part II) : Personal Characteristics

Part II in this study continues Part I in the previous issue in this journal concerning the balancing of investment risk and return. This article provides empirical evidence on the relationship between "personal characteristics" of individual common-stock investors and their risk/return preferences and expectations.This article provides empirical evidence on the relationships between personal characteristics of individual common-stock investors and their risk/return preferences. The defined personal characteristics are (1) sex, (2) age, and (3) marital status. Part I of the study examined these relationships for the specified professional and financial attributes of education, occupation, family income, and dollar holdings of common stock. Although there are numbers personal characteristics that could influence individual investor behavior, the literature discusses investors in terms of their age, sex, and marital status. Empirical evidence indicates that males and females tend to place different emphasis on capital appreciation and dividends. Males tend to be more focused on capital gains and less on dividends than females. This suggests that males accept greater risk in hope of larger returns. Although the literature does not totally agree concerning the relationship between between investor age and risk/return preferences, the consensus is that investors tend to become more conservative and income oriented as they age. Investors have been portrayed as following an "investment life cycle" in which risk/return preferences shift at various stages in the cycle