Understanding Financial Risk Tolerance: Institutional, Behavioral and Normative Dimensions

Preface
Acknowledgments
Contents
About the Authors
List of Figures
List of Tables
1 Financial Risk Tolerance: Where Does It All Start From?
	1 A Crossroad: Why Looking at Risk Tolerance?
		1.1 The Economists’ View
		1.2 The Macroeconomic Perspective
		1.3 The Regulator’s View
	2 Trends in Financial Risk Tolerance
		2.1 Definitions of Risk Tolerance
		2.2 Risk Tolerance Determinants
			2.2.1 Socio-Demographic Factors
			2.2.2 Economic Factors
			2.2.3 Personality Psychology
		2.3 Measurement Tools
			2.3.1 Choice Dilemmas
			2.3.2 Expected-Utility-Based Tools
			2.3.3 Objective Measures
			2.3.4 Heuristic Methods
			2.3.5 Self-Reported/Subjective Risk Measures
			2.3.6 Risk-Behavior Scales
	3 Conclusions and Roadmap of the Book
	References
2 Risk Tolerance Tools: From Academia to Regulation and Back
	1 The Market in Financial Instruments Directive (MiFID) and its Impact on Risk Tolerance Measurement
		1.1 Introducing MiFID
			1.1.1 A Brief History, Context, and Content
			1.1.2 Classification of Clients, Disclosure Obligations, Assessment of Appropriateness and Suitability
		1.2 MiFID and the Suitability Questionnaire
			1.2.1 Questionnaire Overview
			1.2.2 Implementing the Directive: Empirical Evidence and Practitioners’ Views
	2 The Academic Debate After MiFID
		2.1 Socio-Demographic Variables
		2.2 Life Events
		2.3 Behavioral and Personality Factors
		2.4 Risk Tolerance: Stable Trait or Adaptive Feature?
	3 The Market in Financial Instruments Directive 2 (MiFID2)
		3.1 MiFID2, Context and Content
		3.2 Suitability and MiFID2
		3.3 Implementing the Directive: Empirical Evidence and Practitioners’ Views
	4 The Academic Debate After MiFID2
		4.1 Socio-Demographic Factors
		4.2 Life Events
		4.3 Behavioral and Personality Factors
		4.4 Risk Tolerance: Stable Trait or Adaptive Feature?
	5 Taking Stock and Looking at the Challenges Ahead
	References
3 Challenges and Opportunities in the Regulation of Financial Instruments Post-MiFID2—Sustainable Finance
	1 Sustainable Finance in a Sustainable Union
		1.1 Sustainable Development in the European Union Legislation
		1.2 From Theory to Action: The EU Action Plan on Sustainable Development
		1.3 Setting the Plan into Action
			1.3.1 Goal 1—Re-Orienting Investment Toward Sustainable Finance
			1.3.2 Goal 2—Sustainability in Risk Management
			1.3.3 Goal 3—Fostering Transparency and Long-Termism
		1.4 The Action Plan and Investor Protection: Taking Stock and Moving Forward
	2 Investing in Sustainability—Investor Preferences, Risk Tolerance, and Investment Behavior
		2.1 Sustainability Investment—Where Does Europe Stand?
		2.2 Sustainable Investors—Who Are They and Why Do They Choose Sustainable Products?
			2.2.1 Demographic Characteristics
			2.2.2 Economic Reasons
			2.2.3 Social Reasons
		2.3 Are Sustainable Investors Biased?
			2.3.1 Updating Information and the Role of the Past
			2.3.2 The Disposition Effect and Emotions
	3 Implications for Financial Risk Tolerance and Investment Choices
	References
4 The Digital Challenge: How Are New Technologies Shaping the Financial Industry?
	1 The Technological Revolution of the Financial Services Industry
		1.1 The Digitalization and Open Challenges
	2 Fintech
		2.1 A Definition
		2.2 Fintech Users
		2.3 Fintech Services
		2.4 The Academic Point of View on Fintech
	3 Open Banking and Open Finance
		3.1 A Definition of Open Banking
		3.2 The Evolution of Open Banking: Toward Open Finance
		3.3 The Academic Point of View on Open Banking
	4 Robo Advisory
		4.1 A Definition of Robo-Advisory Services
		4.2 Business Models for Robo Advisory
		4.3 The Academic Point of View on Robo Advisory
	5 The Regulatory Framework
		5.1 The Payment Services Directive (PSD2)
		5.2 The Revised Guidelines on Suitability by ESMA (2018)
	6 Conclusions
	References
5 Challenges and Opportunities for the Future Investor: A Practitioner’s Guide
	1 The Survey
		1.1 Some Reasons Why
		1.2 Survey Structure and Participant Pool
			1.2.1 General Information
			1.2.2 The Sustainable-Finance Section
			1.2.3 Robo Advisory and Open Finance
			1.2.4 Socio-Demographic Characteristics
	2 Survey Results
		2.1 Participants Overview
		2.2 Sustainable Finance
		2.3 Robo Advisory and Open Finance
	3 Final Discussion and Conclusions
	Appendix: The Questionnaire
Index