Risk Tolerance, Return Expectations and Other Factors Impacting Investment Decisions

  • Swaminathan Sivarajan

Student thesis: Doctor of Business Administration


Do investment portfolios meet the needs and preferences of investors? Can the portfolio selection process be improved? Traditionally, investor preferences have been identified using risk tolerance questionnaires. These questionnaires have recently attracted a fair deal of criticism. However, there has been little focus as to whether the questionnaires are useful in predicting investors’ risk-taking behaviour. In this thesis, an explanatory sequential mixed methods approach was employed to find answers to the primary research question: what factors determine risk-taking behaviour in investment decisions? This thesis looked at the risk-taking behaviour of investors in Canada (N=192) and the risk-taking advice provided by financial advisers in Canada (N=155), collectively risk-taking decisions. The results suggested that return expectations and demographic variables were important predictors of risk-taking decisions, whereas risk tolerance questionnaires were not. Further investigation suggested that investment literacy impacted risk-taking decisions while investment experience impacted both return expectations and risk-taking decisions. In a novel contribution by this thesis, additional perspective was provided by qualitative analysis using semi-structured interviews with investors and advisers. From the results of the qualitative analysis, the author suggests that discovery and self-discovery, a consistent approach and a focus on process versus outcome are key attributes valued by both investors and advisers. The thesis concluded with implications and recommendations for stakeholders, including a greater focus on return expectations, more training in discovery for advisers, simulating investment experience for prospective investors and including investment literacy in school curricula.
Date of Award3 Jan 2019
Original languageEnglish
Awarding Institution
  • The University of Manchester
SupervisorOscar De Bruijn (Supervisor) & Alexandros Kostakis (Supervisor)


  • financial decision-making
  • financial advice
  • investment decisions
  • behavioural research
  • investor preferences
  • risk-taking behaviour
  • Risk tolerance questionnaires
  • mixed methods methodology

Cite this