Finance and Accounting
Research Division

ICMA Centre

Taking the right amount of risk: Using psychology to inform investment choices

A tool developed by researchers at Henley Business School is transforming investment outcomes, by employing psychological principles to enable independent financial advisors (IFAs) to assess their clients’ attitudes to risk more accurately.

Recognising the complexity of decision-making processes around financial investment, Professor Chris Brooks and chartered psychologists Professor Carola Hillenbrand and Professor Kevin Money used psychometric theory to develop a new attitude-to-risk questionnaire (ATRQ) that provides a more robust assessment of consumer risk appetite. Unlike other such tools available to IFAs, it considers emotional dimensions of attitude to risk as well as cognitive and behavioural aspects.

Since its launch in February 2018, the questionnaire has been used by almost 200,000 retail investors when meeting with over 2,000 financial advisers, and it currently constitutes around 20% of all such questionnaires completed in the UK. Find out more. 

Bitcoin under the microscope

A strand of Professor Andrew Urquhart’s research focuses on cryptocurrencies, and their impact on financial markets and society. One project, “Bitcoin under the microscope”, is a detailed study of the bitcoin blockchain, and notably the winners and losers from timing trades on this cryptocurrency, as well as errors made by investors. This project is one of the first such studies of bitcoin, with important insights for investors, as well as regulators. 

Socially responsible investment and green finance

Socially responsible investment and the consideration of environmental, social and governance (ESG) factors by corporate managers and investors has seen significant growth over recent decades – both in the financial industry and academia. Research by Dr Ivan Sangiorgi and Dr Lisa Schopohl explores how investors incorporate ESG factors in their investment decisions. 

Collaborating with the Climate Bonds Initiative, they investigate the attitudes of investors and issuers of green bonds. Green bonds are financial instruments whose proceeds are used to fund new and existing projects with environmental benefits. Key findings from their research show that issuing green bonds helps organisations to transition to a low-carbon business model, to broaden their investor base and to enhance their reputation and visibility – while cheaper funding through green bond issuance is not the main driver for green bond issuance. From the investor perspective, results suggest that there is strong investor appetite for green bonds, but supply does not currently meet demand, especially for corporate bonds in high-emitting sectors and sovereign issuances with high climate impact. Overall, the findings of the research have important policy implications for growing the green bond market and facilitating the transition to a low-carbon economy.

Henley Business School has a vibrant group of about 260 PhD and DBA researchers. Doctoral students are an integral part of our research community and participate in the research activities of the school.

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For specific enquiries, please contact:

Professor Mike Clements

Research Division Lead

Email: m.p.clements@icmacentre.ac.uk