Risk Tolerance and the Adoption of Stop-Loss Strategies among Retail Investors in the Indian Stock Market
DOI:
https://doi.org/10.69980/kp4q9a68Keywords:
Risk Tolerance, Stop-Loss Strategy, Retail Investors, Behavioural Finance, AdoptionAbstract
This paper examines the association between risk tolerance and the usage of stop-loss strategies by retail investors in the Indian stock market. The paper uses primary data collected from 72 investors using a structured questionnaire with five-point Likert scales and employs correlation analysis and ordinal logistic regression to examine the hypotheses. The results indicate that higher risk as a predictor of stop-loss usage is significant, but self-identified risk profile is not significant. Moreover, behavioral response to market downturns is identified as a robust predictor of disciplined stop-loss strategy, accounting for a larger variance than general risk tolerance metrics. The results indicate that dynamic behavioral responses to market volatility have a more significant impact on the adoption of formal risk management strategies than static risk identity. This paper makes a contribution to the literature on behavioral finance by indicating that disciplined protective action is linked to active risk engagement rather than risk tolerance.
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