THE INFLUENCE OF THE SOUTH AFRICAN MARKET PHASES ON INDIVIDUAL RISK PROFILING

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Abstract

This study involves an investigation into the act of risk profiling, and whether or not it will differ during different market trends. The literature review involves an in-depth discussion about risk tolerance and what factors determine it, as well as behavioural finance, bull and bear market phases, strategic asset allocation, and the duty of a diligent financial advisor to his or her clients. In order to conduct the investigation, 210 respondents under the age of 33 years filled out actual risk profile questionnaires, each having one of three market conditions simulated: bear market conditions, bull market conditions, or no market conditions (current market conditions assumed). These three different simulated market conditions form the three groups which were to be compared to each other. Each respondent was categorised based on the type of investor he or she was deemed to be: conservative, moderately conservative, moderate, moderately aggressive, or aggressive. The three groups were then tested using a paired samples T test for statistically significant differences between their means. At a 5% level of significance, the evidence showed that there was not a statistically significant difference between risk profiling during a bull market and risk profiling during a bear market, which resulted in failure to reject the null hypothesis.

Keywords: Risks, Finance, South Africa, Risk Profiling

How to cite this paper: Jansma, L., van Heerden, J. D. (2010). The influence of the South African market phases on individual risk profiling. Corporate Ownership & Control, 7(4-4), 453-461. https://doi.org/10.22495/cocv7i4c4p3