English, Article edition: Variance and beta as perceived risk: questionable science Robert A. Olsen

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Bookmark: http://trove.nla.gov.au/version/9058
Physical Description
  • article
Language
  • English

Edition details

Title
  • Variance and beta as perceived risk: questionable science
Author
  • Robert A. Olsen
Physical Description
  • article
Notes
  • Purpose – The purpose of this paper is to discuss the origin of variance and beta as risk measures and to identify their shortcomings as perceived risk metrics. Design/​methodology/​approach – The paper analyses seminal literature from economics, psychology, and neuroscience that have relevance to financial risk. Findings – There is empirical evidence that investors are loss-averse and affectively influenced. Variance and beta as conventionally calculated are flawed because they do not take into account the inherent indeterminacy of the investor's world. Practical implications – The paper demonstrates that perceived risk will be systematically mis-measured and that risk premium/​return anomalies will prevail until a more affective and multidimensional risk metric is utilized. Originality/​value – The value of the paper lies in its concise and clear identification of financial risk measurement issues and a suggested direction for remediation.
  • Financial risk, Risk analysis
  • RePEc:eme:qrfmpp:v:1:y:2009:i:2:p:97-105
Language
  • English
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