Bridge over ocean
1 March 1997 Financial Analysts Journal Volume 53, Issue 2

Investment Risk: The Experts' Perspective

  1. Robert A. Olsen

Investment management requires managers and their clients to share a general definition of investment risk. Professional portfolio managers and individual investors also seem to share a common conception of investment risk. Specifically, investment risk, as well as risk in other decision domains, appears to be a function of four attributes: the potential for a large loss, the potential for a below-target return, the feeling of control, and the perceived level of knowledge. Based on a survey study, these risk factors explained approximately 77 percent of the variation in security returns between 1965 and 1990.

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