Gender Differences in Financial Risk Taking: The Role of Financial Literacy and Risk Tolerance

2016 ◽  
Author(s):  
Christina E. Bannier ◽  
Milena Neubert
Keyword(s):  
Gender Differences ◽  
Risk Taking ◽  
Financial Literacy ◽  
Financial Risk ◽  
Risk Tolerance

Retail Investors’ Financial Risk Tolerance and Risk-taking Behaviour: The Role of Psychological Factors

2021 ◽  
pp. 231971452110582
Author(s):  
Pragati Hemrajani ◽  
Rajni ◽  
Rahul Dhiman
Keyword(s):  
Risk Taking ◽  
Psychological Factors ◽  
Structural Equation ◽  
Financial Risk ◽  
Risk Tolerance ◽  
Individual Investors ◽  
Financial Advisors ◽  
Research Model ◽  
Financial Risk Tolerance

The aim of this article is to look at how two psychological factors affect financial risk tolerance (FRT) and financial risk-taking behaviour (FRB) of individual investors. The study also investigates the role of FRT in mediating the relationship between psychological factors and FRB. A standardized questionnaire was used to collect the information. For the study, a total of 303 completed questionnaires were used. The proposed research model was validated and assessed using partial least squares structural equation modelling. The findings revealed some important experiences. Emotional intelligence and impulsiveness have a significant relationship with both FRT and FRB, according to the results. The findings also support FRT’s position as a mediating factor in the proposed research model. The results emphasize the importance of psychological factors in determining an individual’s FRT and FRB. FRT is a complex mechanism that entails more than just psychological considerations. As a result, further research is needed to decide which additional factors financial advisors can use to increase the explained variance in FRT inequalities.

scholarly journals Overconfidence in financial knowledge associated with financial risk tolerance in older adults

2020 ◽  
Author(s):  
Gregory Russell Samanez-Larkin ◽  
Gary Mottola ◽  
Darby Heflin ◽  
Lei Yu ◽  
Patricia Boyle
Keyword(s):  
Older Adults ◽  
Cognitive Impairment ◽  
Risk Aversion ◽  
Risk Taking ◽  
Financial Literacy ◽  
Financial Risk ◽  
Risk Tolerance ◽  
Older Age ◽  
Financial Knowledge ◽  
Financial Risk Tolerance

Taking excessive financial risk in older age can have harmful, far-reaching consequences as opportunities to recover lost wealth are limited. Better understanding the mechanisms of financial risk taking in older age is critically important for both identifying vulnerabilities in certain older adults and for developing interventions to empower aging investors to make wise financial choices into the most advanced ages. The goals of the present study were to identify age differences in financial literacy, confidence in financial knowledge, and risk taking and how literacy and confidence were related to financial risk taking across older adults with and without cognitive impairment (ages 58–101). Using cross-sectional data from the Rush Memory and Aging Project, analyses revealed that risk aversion was higher and self-reported willingness to take financial risks was lower at older ages. Financial literacy was similar across the sixties and seventies but lower at the oldest ages. However, confidence in financial knowledge was not associated with age when controlling for financial literacy. In exploratory analyses, a measure of overconfidence in financial knowledge was positively associated with self-reported financial risk tolerance but not a behavioral measure of risk aversion. The overconfidence effect on risk tolerance did not vary across individuals with no cognitive impairment or Mild Cognitive Impairment (MCI). Overconfidence accounted for about 6% of the variance in financial risk tolerance. The present results suggest that overconfidence may contribute to risky financial behavior. Calibration of confidence levels to actual literacy is a potential target for future interventions aimed at protecting senior investors.

A qualitative phenomenological exploration of social mood and investors’ risk tolerance in an emerging economy

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Humaira Asad ◽  
Iqra Toqeer ◽  
Khalid Mahmood
Keyword(s):  
Theoretical Model ◽  
Thematic Analysis ◽  
Financial Literacy ◽  
Financial Risk ◽  
Theoretical Perspective ◽  
Emerging Economy ◽  
Risk Tolerance ◽  
Validity And Reliability ◽  
Content Type ◽  
Depth Analysis

Purpose The authors design a theoretical perspective that explores how different phases of social mood influence financial risk tolerance (FRT) among investors. Risk is involved in almost all financial decision-making. For a better understanding of risk tolerance behavior, the role played by social mood cannot be ignored. This study aims to explore the linkage between social mood and FRT of investors in Pakistan. Design/methodology/approach Using qualitative phenomenology as the guiding framework, 22 interviews were conducted to have a deeper understanding of the lived experiences of investors with at least 10 years of investment experience. Thematic analysis was done to analyze data. Audio-recording, bracketing, triangulation and member checking were done to ensure validity and reliability. Findings A theoretical model is developed using the six themes identified through thematic analysis. This model presents an in-depth analysis of the determinants of social mood, its multiple phases and its impact on risk tolerance behavior. Findings reveal that the level of financial literacy, experience and purpose of investment moderate the effect of social mood on FRT. Practical implications Investors can manage risk and increase their profits by controlling the effects of social mood. They can benefit from the market situation by taking more risk when the market is extremely low. The advisors can frame their advice in the light of the model. Originality/value According to the authors’ knowledge, this is the first study that explores investors’ risk tolerance in response to variations in social mood in the context of an emerging economy. The paper has contributed conceptually and methodologically. It uses phenomenology as the method and develops a theoretical model that describes how different types of investors adjust their risk tolerance in response to changes in their social mood.

Antecedents to responsible financial management behavior among young adults: moderating role of financial risk tolerance

2020 ◽  
Vol 38 (5) ◽  
pp. 1177-1194 ◽  
Author(s):  
Dhananjay Bapat
Keyword(s):  
Young Adults ◽  
Financial Management ◽  
Financial Risk ◽  
Risk Tolerance ◽  
Financial Knowledge ◽  
Financial Behavior ◽  
Management Behavior ◽  
Content Type ◽  
Financial Risk Tolerance

PurposeThe study examines the antecedents of responsible financial management behavior among young adults in India and explores the role of financial risk tolerance as a moderating variable.Design/methodology/approachThe sample includes young adults in the age group of 18–35. The analysis uses a two-step approach via standard partial least squares structural modeling (PLS-SEM) and ordinary least square (OLS) regression.FindingsStructural modeling results show that financial attitude fully mediates the relationship between financial knowledge and responsible financial management behavior, and locus of control influences responsible financial management behavior. Financial risk tolerance moderates the relationship. Among demographic factors, age and occupation influence responsible financial management behavior.Research limitations/implicationsThe financial knowledge used in the survey are based on self-reported responses. The future study can include participants from both developed and emerging countries to assess similarities and differences.Practical implicationsDespite the growing focus on improving financial literacy, there are growing concerns regarding responsible financial behavior. Since financial services is related to fiduciary responsibility, managers and policymakers need to ensure that financial knowledge results in improving financial attitude, which further leads to responsible financial behavior.Originality/valueThe present study from an emerging country will add value to the literature.

Sign in / Sign up

Export Citation Format

Share Document