How to Better Understand Your Risk Tolerance

Market Watch-“Most risk-tolerance surveys contain questions that are not explicitly grounded in theory,” according to Sherman Hanna, a professor at Ohio State University and co-author (along with Michael Finke, a professor at Texas Tech University, and Michael Guillemette, a doctoral candidate at Texas Tech University) of a soon-to-be published book on the subject, “Portfolio Theory and Management.”

BOSTON—Somewhere along the way, your adviser or brokerage firm asked you to fill out what’s called a risk-tolerance questionnaire, presumably before you invested a dime in this or that bond, ETF, mutual fund or stock such as, say, Facebook.

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“Most risk-tolerance surveys contain questions that are not explicitly grounded in theory,” according to Sherman Hanna, a professor at Ohio State University and co-author (along with Michael Finke, a professor at Texas Tech University, and Michael Guillemette, a doctoral candidate at Texas Tech University) of a soon-to-be published book on the subject, “Portfolio Theory and Management.”

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