In last week's superb FT article on matching investors to investment risk, (Risk, the retail investor and disastrous new rules) John Kay rightly points out the foolishness of using recent historical volatility as a proxy for (future) investment risk. However, whilst focussing on the problems with establishing the risk of investments, he only briefly touched on determining appropriate risk levels...
The partnership will bring together industry leading capabilities in decision science, behavioural finance, and risk profiling Combining the deep expertise and industry knowledge of Centapse with the academic rigour and research capabilities of Oxford Risk, the collaboration will offer behavioural finance consultancy, advanced data analytics, and intelligent decision-support systems. An expanded suite of risk profiling tools will be released for Oxford Risk...
New approaches to risk profiling are garnering increased attention in recent years. Many of these, however, are over-engineered and unnecessary. This is particularly true of those that claim to simultaneously measure multiple parameters of complex decision models using ‘revealed preferences’. Such measures are unstable and, more importantly, confuse aspects of investors’ preferences that should be reflected in their ideal portfolio,...