The Influence of Consultation on Investor Risk/Return Behavior

The analysis reveals that the following relationships exist regarding risk-return behavior in independent (usually receives no help) versus consultative (usually receives help) investment decision making, One, investors who usually make consultative decisions are willing to accept a lower risk of financial loss than individuals who usually make independent decisions. Two, investors who either make independent or consultative decisions associate high dividends with low risk. But investors who make consultative decisions are more interested in dividend income than those who make independent decisions. Consultative decision makers are also willing to accept less risk per level of dividend income. Three, Investors who make either independent or consultative decisions associate high capital appreciation with high risk. But investors who make independent decisions are more interested in capital appreciation than those who make consultative decisions. Independent decision makers are also willing to accept more risk per level of capital appreciation. Four, professional counselors and/or stockbrokers are the most important used by individual investors who make consultative investment decisions, Five, independent and consultative decision makers differ by sex, occupation, and annual return expectations on common stocks.The study is preliminary in nature and care should be taken in extrapolating the results to investors in general or to other time periods. Additional research of a broader scope is needed concerning the attributes of independent and consultative investors. For example, the measurement scale and risk definition should perhaps be reexamined. Further, a multivariate model could be used to explore the relationships among the important variables isolated in this study and others should be examined. An effort could also be made to compare stated and actual investor behavior. Finally, this type of investigation could also be extended to other types of investors, such as professional portfolio managers.Although more research is needed, this study reveals that independent and consultative decision makers do differ in aspects of risk-return behavior and socioeconomic and return expectation characteristics