Risk Attitude Of Individual Investors And Stock Investment Outcome

Ever since the opening policy, China's economics have grown rapidly. The income and wealth of Chinese residents is raising, more and more families in China are beginning to manage and invest their money. The traditional way, such as deposit, can't satisfy their needs any more. Some of the investors choose to invest their money in the stock market. Unlike the foreign stock market, there are more individual investors than institutional investors in China stock market. And the trading volume of the individual investors takes up 80% of the gross volume. It's necessary to study the market behavior of the individual investors.Domestic and foreign researchers have done plenty of research on risk attitude, but most of the research are about the correlation between risk attitude and assets allocation. And those who study the stock market investment outcome, which factors are objective. And this paper is creative since it studies the correlation between risk attitude and stock market behavior, which includes the participation and the outcome.This study is based on the database of Chinese Household Finance Survey of 2013, and this paper is mainly about the influence of individual investors'risk attitude on the stock market participation and the investment outcome.First, this paper will demonstrate the background and significance of this study and then will go through all the related research and theory. Second, two hypotheses will be made based on those research and theory. One is that investors who are risk seeking will allocate higher portion of assets on stock market than those who are risk-averse. The other is that investors who are risk seeking will more likely to benefit from the stock market than those who are risk-averse. Third, descriptive statistics will be used to demonstrate the essential characteristic of the data and econometric models will be built to study the hypotheses. Stepwise method will be used to study the correlation between risk attitude and stock market participation and Probit Model will be used to study the correlation between risk attitude and stock market outcome. And the study shows that the risk attitude of individual investors have the positive impact on both stock market participation and investment outcome. The study shows that risk attitude has positive influence on the stock market participation and it also has positive influence on the stock market investment outcome. Finally, some advice will be given based on the result of the study.