Investment Risk Preferences Between Chinese and British
Topic: investment risk preferences between Chinese and British
Introduction
Every day people make decisions based on their investment and daily operation. No
matter whether the decision is big or small there is a level of uncertainty or risk that
tends to exist in every person. In the real world, people perceive ideas differently
hence the difference in risk preference. In essence, people tend to have an impression
that the Chinese people are more conservative as compared to the British in making
their investment and monetary decisions. Empirical findings have indicated that the
rate of saving in China is one of the highest in the world (Ma, 2011). The culture of
individual influences their risk preference due to the social networks surrounding the
people (Einav et al, 2012)
The goal of this essay is to investigate the difference in investment risk preference
between the British and Chinese. Therefore, the essay will be divided into two
sections. The first part will give an analysis of the factors that are affecting investment
risk preference indicating which of the two countries has a high-risk tolerance while
section two will indicate the reasons as to why there exists a difference.
Chinese are more risk seeking as compared to the U.K investors. Chinese investments
are influenced by preferences, cultural variations and beliefs have influenced the
financial risk taking behaviors They have high risk taking patterns and behaviors as a
good balance between high returns and risks related took their investments.
Section 1
PSE Project Extended Plan Template
Comparatively, the Chinese are deduced to more risk-seeking than the British in
making Investment decisions. Ideally, the people that are considered to be more
collectivistic indicate a higher risk-seeking behaviour in investment decisions.
Precisely if an individual displays more collective predisposition, then they reveal to
be further risk seeking in terms of investment choices.
Figure 2: Risk aversion; Source (Holt, 2002).
From the figure above it is evident that the British have high-risk aversion as
compared to the Chinese. According to research espoused by Hilton, (2001), the
Chinese participants were ready to give up gifts they had received in exchange for a
new gift. Decision making groups are becoming more diverse at many levels of the
society. Within-country borders, this change is being driven by the increasing
participation in risk-taking decisions (Weber, 2000).