INDIVIDUAL INVESTORS RISK JUDGMENTS AND INVESTMENT DECISIONS - THE IMPACT OF ACCOUNTING AND MARKET DATA

This study experimentally investigates whether risk judgments and inve stment decisions of individual investors are affected by the variables noted In portfolio theory (i.e. variance of returns and covariance of returns with the market return) and/or accounting risk measures. Resu lts indicate that investors are able to assess and do (not) use return variance (covariance) as described in portfolio theory. When accounti ng and market measures are In conflict, the participants' risk judgmen ts correspond with accounting measures rather than market measures. (C ) 1998 Elsevier Science Ltd. AU rights reserved.