A recent paper from Santa Clara University studies the links between personality and risk tolerance, overconfidence, regret, trust, and life-satisfaction. Surveying more than 2,500 people, Carrie H. Pan and Meir Statman of the University's Leavey School of Business report that risk tolerance is high among those with high levels of extroversion and openness; and that it is relatively low among those with high levels of conscientiousness. “Knowledge about these links is important to financial advisors who must know their clients so they might guide them,” reads a snatch in their research paper, Investor Personality in Investor Questionnaires ( www.ssrn.com ).

Adjectives associated with extroversion include enthusiastic, talkative, and outgoing, the authors explain. They find that people high in extroversion tend to agree with statements such as: ‘I don't mind being the centre of attention,' ‘I feel comfortable around people,' and ‘I start conversations.' In contrast, the adjectives associated with conscientiousness include organised, responsible, and thorough. The paper informs that a manifestation of investment overconfidence is a belief that one has the skill to pick winning stocks with above-average returns. Therefore, to measure levels of overconfidence, a survey question was posed thus: “Some people believe that they can pick stocks that would earn higher-than-average returns. Other people believe that they are unable to do so. Please indicate your belief by circling the number on a scale ranging from ‘Strongly believe I cannot pick higher-than-average stocks' to ‘Strongly believe I can pick higher-than-average stocks.'”

The renewables thrust

Renewable energy technologies can mitigate climate change, but scaling these technologies is a big task. Stating that it is too great a challenge for either the public or private sector to shoulder alone, Felix Mormann of Stanford Law School says that public policy must catalyse private investment in renewable energy.

Studying empirical evidence of deployment support for renewables from 35 countries, the author notes in Enhancing the Investor Appeal of Renewable Energy that there are enormous differences in policy performance.

The most successful and cost-effective deployment policies are those with the most favourable impact on the examined “soft-cost” factors and, hence, with the greatest conceptual appeal to renewable energy investors, observes Mormann. He reminds, for instance, that the face value of a deployment policy's remuneration level is an essential but by no means the only investment-based factor that determines whether a private, profit-oriented party invests in electricity generation from renewable sources of energy.

“Other key factors include investment certainty, associated transaction costs, and the range of potential investors and investment opportunities.”

Useful takeaways for policymakers in the renewables space.

Related Topics
comment COMMENT NOW