A test of the relationship between self-classified financial risk-tolerance and investment risk-taking behaviour

Grable, John E.; Roszkowski, Michael J.; Joo, So Hyun; O’Neill, Barbara; Lytton, Ruth H.

doi:10.1504/ijram.2009.025929

Cited by 25 publications

(18 citation statements)

References 5 publications

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“…One possible specific measure of attitude is financial risk tolerance, which is defined as the willingness to engage in financial behaviours with uncertain outcomes that have an identifiable negative outcome, and thereby indicates the amount of financial uncertainty someone is willing to accept (Grable 2000;Grable andLytton 1999, 2003;Grable, Lytton, and O'Neill 2004;Grable et al 2009). While financial risk tolerance seems unexamined in relation to saving intention, it does predict actual risk taking and risk avoiding behaviour (Gilliam, Figure 1.…”

Section: Theorymentioning

confidence: 99%

Psychological determinants of financial buffer saving: the influence of financial risk tolerance and regulatory focus

Magendans

Gutteling

Zebel

2016

Journal of Risk Research

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With governments redistributing more responsibilities unto citizens, individuals have an increasing need for financial resources acting as a buffer against life's setbacks and unexpected expenditures. The purpose of this study was to examine psychological determinants of saving for a financial buffer, for which a theoretical model was formulated based on the theory of planned behaviour with three new, domain-specific psychological constructs: financial risk tolerance, regulatory focus and perceived saving barriers. Data were collected with an online questionnaire that utilised convenience and snowball sampling to target both students and working individuals (N = 272). Regression analyses offered support for the proposed model, showing that participants' financial risk tolerance (i.e. an individual's attitude towards financial risk taking) was significantly associated with their subjective financial knowledge and regulatory focus. Furthermore, perceived financial self-efficacy and financial risk tolerance both predicted participants' intention to save for a financial buffer. In turn, perceived financial selfefficacy and saving intention predicted self-reported saving behaviour. Importantly, perceived saving barriers mediated the relationship between saving intention and self-reported saving behaviour. In line with the proposed model, results also showed that a specific attitude-based construct (financial risk tolerance) is a considerably better predictor of saving intention than general measures of attitude towards saving. This study is also the first to demonstrate that regulatory focus influences financial risk tolerance. Implications of these findings for stimulating saving behaviour are discussed.

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Section: Theorymentioning

confidence: 99%

Psychological determinants of financial buffer saving: the influence of financial risk tolerance and regulatory focus

Magendans

Gutteling

Zebel

2016

Journal of Risk Research

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“…Such a situation may adversely affect the client-advisor relationship (Larkin et al, 2013). In addition, it leads to an unfavourable impact on the advisor's career and exposes him to litigation, arbitration, and legal jeopardy (Grable, Roszkowski, Joo, O'Neill, & Lytton, 2009). This problem could be minimized by an investor himself/herself measuring his/her FRT instead of FRT being measured by others (i.e., advisors) as there is a strong relationship between investment behaviour of an individual and his/her FRT (Bailey & Kinerson, 2005;Schooley & Worden, 1996).…”

mentioning

confidence: 99%

Relationship between Biopsychosocial Factors and Financial Risk Tolerance: An Empirical Study

Kannadhasan

Aramvalarthan

Mitra

et al. 2016

Vikalpa: The Journal for Decision Makers

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Executive SummaryFinancial risk tolerance (FRT) refers to the retail investors’ willingness to accept the negative changes in the value of investment or an outcome that is adversely different from the expected one. Understanding and assessing FRT plays a crucial role in individual choices about wealth accumulation, portfolio allocation, and all other investment and finance-related decisions, and in achieving financial goals. An advisor has to accurately assess FRT for achieving his/her goal or investor’s goal. Failure to do so leads to the choice of an investment option/portfolio which is inconsistent with one’s FRT, resulting in investor disappointment, that is, unbearable loss to the client. Such a situation may adversely affect the client–advisor relationship.Measuring FRT is challenging as it is a multidimensional attitude. Besides, it is an elusive concept that appears to be influenced by a number of predisposing factors such as demographic, environmental, and psychosocial factors. This study aims to identify the factors that are related to risk tolerance from outside the financial services domain such as psychology, economics, and bio-sociology. It deals most specifically with the relationship between biopsychosocial factors and FRT. Those who are interested in assessing and predicting FRT can move closer to a theoretical account that blends psychological and economic insights and supplements the understanding of risk-taking attitudes and behaviour of retail investors. Such an understanding will help financial advisors, policy makers, and researchers in identifying the determinants of an individual’s FRT to suggest the suitable investment alternatives to their clients.A single cross-sectional survey was conducted among 951 retail investors with various levels of investment experience through a structured questionnaire covering a variety of demographic factors. An analysis of the data collected through the questionnaire indicates that all the three factors—self-esteem, personality type, and sensation seeking—are positively related to FRT. This study adds to the extant literature on psychological determinants of FRT.

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“…derives from aspects related to: management, accounting function, nature of business and the auditor's previous experiences with the client. Specific risk derives from aspects related to the auditor's previous experience and from the current understanding of each area of the audit [2].…”

Section: Theoretical Backgroundmentioning

confidence: 99%

Integrating Risk Management Into Decision Making

Boghean¹

2020

LUMEN Proceedings

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The main forms of risk are can be grouped in eight categories: economical risks, financial risks, commercial risks, manufacturing risks, political risks, social risks, juridical risks, natural risks. Through its nature the decision is referring to the future, mainly being provisional. In any decisional process developed at the company level, there are involved in the same time some economical, techniques, juridical, human and managerial variables. As a consequence of the decision (generally) and of managerial decision (particularly), because of its complexity and its contextual deter in its growth there are associated many risks.

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A test of the relationship between self-classified financial risk-tolerance and investment risk-taking behaviour

Cited by 25 publications

References 5 publications

Psychological determinants of financial buffer saving: the influence of financial risk tolerance and regulatory focus

Psychological determinants of financial buffer saving: the influence of financial risk tolerance and regulatory focus

Relationship between Biopsychosocial Factors and Financial Risk Tolerance: An Empirical Study

Integrating Risk Management Into Decision Making

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