Finance and Accounting

Research highlights

Taking the right amount of risk: Using psychology to inform investment choices

A tool developed by researchers at Henley Business School is transforming investment outcomes, by employing psychological principles to enable independent financial advisors (IFAs) to assess their clients’ attitudes to risk more accurately.

Recognising the complexity of decision-making processes around financial investment, Professor Chris Brooks and chartered psychologists Professor Carola Hillenbrand and Professor Kevin Money used psychometric theory to develop a new attitude-to-risk questionnaire (ATRQ) that provides a more robust assessment of consumer risk appetite. Unlike other such tools available to IFAs, it considers emotional dimensions of attitude to risk as well as cognitive and behavioural aspects.

Since its launch in February 2018, the questionnaire has been used by almost 200,000 retail investors when meeting with over 2,000 financial advisers, and it currently constitutes around 20% of all such questionnaires completed in the UK. Find out more.

Bitcoin under the microscope

A strand of Professor Andrew Urquhart’s research focuses on cryptocurrencies, and their impact on financial markets and society. One project, “Bitcoin under the microscope”, is a detailed study of the bitcoin blockchain, and notably the winners and losers from timing trades on this cryptocurrency, as well as errors made by investors. This project is one of the first such studies of bitcoin, with important insights for investors, as well as regulators.

Socially responsible investment and green finance

Socially responsible investment and the consideration of environmental, social and governance (ESG) factors by corporate managers and investors has seen significant growth over recent decades – both in the financial industry and academia. Research by Dr Ivan Sangiorgi and Dr Lisa Schopohl explores how investors incorporate ESG factors in their investment decisions.

Collaborating with the Climate Bonds Initiative, they investigate the attitudes of investors and issuers of green bonds. Green bonds are financial instruments whose proceeds are used to fund new and existing projects with environmental benefits. Key findings from their research show that issuing green bonds helps organisations to transition to a low-carbon business model, to broaden their investor base and to enhance their reputation and visibility – while cheaper funding through green bond issuance is not the main driver for green bond issuance. From the investor perspective, results suggest that there is strong investor appetite for green bonds, but supply does not currently meet demand, especially for corporate bonds in high-emitting sectors and sovereign issuances with high climate impact. Overall, the findings of the research have important policy implications for growing the green bond market and facilitating the transition to a low-carbon economy.

The first real estate bubble? Land prices and rents in medieval England

Professor Chris Brooks, Professor Adrian Bell and Dr Helen Killick are examining in detail the workings of the English real estate market in the thirteenth to fifteenth centuries.

Using data on the freehold property market between 1300 and 1500 the team investigated the extent to which the medieval English property market was subject to speculative forces caused by buyer investment behaviour. They examine the impact of broader social and economic trends on property market activity, and in particular, the impact of exogenous factors such as war, plague and political crises. Finally they examine fluctuations in our price data for potential signs of a speculative housing bubble.

Mergers and acquisitions mega-deals

ICMA Centre research reveals that value creation from M&As may have reached a pivotal milestone and the high likelihood of large deals ending up in disaster is no longer the status quo.

The study by Dr George Alexandridis and Nikolaos Antypas, co-authored with Prof Nickolaos Travlos from the University of Surrey, is titled Smart Mega Merger Deals: Value Creation on a Massive Scale. It is the first study to examine the characteristics and performance of M&As carried out in the post-financial crisis era, when a new wave of deals emerged in 2010, reaching a peak in 2015.

This research marks a milestone in existing knowledge on acquisition gains and challenges conventional wisdom that firms destroy shareholder value more often than they create when carrying out sizable acquisition investments. Its findings also imply that a financial crisis of grand scale and its shockwaves can ultimately contribute towards more effective monitoring of corporate investment selection decisions, as well as the M&A implementation and integration processes, yielding sizeable benefits for investors.

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Professor Mike Clements

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