Market Volatility and Financial Satisfaction: The Role of Financial Self-Efficacy

Asebedo, Sarah; Payne, Patrick

doi:10.1080/15427560.2018.1434655

Cited by 54 publications

(80 citation statements)

References 20 publications

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“…Asebedo and Payne () investigated the relationship between FSE, RT, and financial satisfaction and found an almost zero correlation between FSE and RT. Moreover, in a combined model, Asebedo and Payne found a negative relationship between RT and financial satisfaction (holding all else constant; consistent with Joo & Grable, ), in addition to a positive relationship between FSE and financial satisfaction (holding all else constant).…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

“…There is evidence for the utility of FSE to predict emotional reactions within the context of investment market risk. Asebedo and Payne () found FSE to have a moderating effect between investment market volatility and financial satisfaction after controlling for RT, suggesting that those with higher FSE are more resilient to an emotional reaction in the presence of investment market volatility. In regard to RT, Asebedo and Payne found a negative relationship between RT and financial satisfaction for low and high FSE groups (the relationship was not significant for the mid FSE group).…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

“…While the intertemporal stability of FSE (and FSE as compared to RT) requires additional research, it appears as though FSE is a relatively durable psychological construct that remains somewhat malleable to certain influences, one of which could be the financial planner as a component of the social environment. Asebedo and Payne (2019) investigated the relationship between FSE, RT, and financial satisfaction and found an almost zero correlation between FSE and RT. Moreover, in a combined model, Asebedo and Payne found a negative relationship between RT and financial satisfaction (holding all else constant; consistent with , in addition to a positive relationship between FSE and financial satisfaction (holding all else constant).…”

Section: Risk Tolerance and Fsementioning

confidence: 99%

“…We therefore include controls for race (equal to 1 if the respondent is non-White and 0 otherwise) and for ethnicity (equal to 1 if the respondent is Hispanic and 0 otherwise). Similar to Asebedo and Payne (2019), the market risk model incorporates financial satisfaction levels in 2006 to control for respondents' affective evaluation of their financial situation in that time period. This model also includes an indicator for the respondent's retirement status (retired = 1, 0 otherwise), since reliance on non-labor sources of income sources may affect the sense of control an individual has over their financial situation.…”

Section: Control Variablesmentioning

confidence: 99%

“…The outcome of interest is financial satisfaction, measured as the amount of satisfaction over one's financial situation on a one to five scale with HRS data. Asebedo and Payne () found that market volatility was associated with lower financial satisfaction scores for those with lower FSE, but no relationship was found between market volatility and financial satisfaction for those with mid to high FSE (after controlling for RT and other variables). Thus, it is possible that FSE might enhance our understanding of emotional and behavioral reactions to risk and serve as a complementary variable with RT to create more robust RT assessment outcomes.…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Two‐factor risk preference for investment market and credit card risk

Payne

Asebedo

2019

Fin Plan Rev

Self Cite

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This study proposes a new “two‐factor” risk preference metric and assesses its effectiveness in predicting financial satisfaction under two risk domains: investment market risk and credit card risk. The factors in our two‐factor assessment are risk tolerance and financial self‐efficacy (FSE), both of which have other theoretical and empirical support as measures of risk attitudes. We explore a range of specifications for the two‐factor risk preference (TRP) metric and find it to be effective in predicting financial satisfaction under uncertainty. Within the TRP framework, FSE emerged as a robust predictor of the financial satisfaction of credit card users regardless of respondents' risk tolerance level; similar results were found for investment market equity owners. Overall, this study presents evidence that suggests risk tolerance and FSE capture different aspects of risk attitudes and are more effective at predicting financial satisfaction together than either one alone. Results suggest that financial planners can more accurately predict client emotional responses to risky situations by assessing client FSE and risk tolerance levels, with FSE effects dominating risk tolerance effects in most cases. Financial planners can then improve client service by using the assessment results as a basis for investment portfolio allocation and credit market participation recommendations.

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Section: Literature Review and Hypothesesmentioning

confidence: 99%

Section: Literature Review and Hypothesesmentioning

confidence: 99%

Section: Risk Tolerance and Fsementioning

confidence: 99%

Section: Control Variablesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Two‐factor risk preference for investment market and credit card risk

Payne

Asebedo

2019

Fin Plan Rev

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Exploring the relationship between investors' financial literacy and advisor use with securities‐based loans

2023

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Past literature has explored the characteristics of individuals who use high‐interest and tax‐inefficient consumer debt products, such as carrying a monthly credit card balance and engaging with alternative financial services. That literature revealed that users of these debt products tended to be financially constrained households faced with an immediate liquidity need, and that they had lower levels of financial literacy. Much less is known, however, about the role financial literacy may play when a more advantageous solution may be available but not used—an example of which is securities‐based loans, which offer lower rates and potential tax preferences. Therefore, this study used the 2018 National Financial Capability Study to examine why investors use traditional debt products when they could likely have qualified for a securities‐based loan. Using bounded rationality as a theoretical framework, this research advances the literature in consumer debt and borrowing decisions. The results found that objective knowledge, as opposed to self‐assessed ability or confidence, explained the use of optimal debt products. Additionally, advisor engagement was positively associated with securities‐based loan use.

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Personality, financial risk‐taking attitude, and older individuals' stock investment decisions

Liu,

Del Asebedo,

Pearson

2023

Fin Plan Rev

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This study investigates the relationship between personality traits and older individuals' stock investment decisions using structural equation modeling. The results suggest that greater openness and extraversion are associated with a higher propensity to participate in stock investments and hold a larger proportion of stock investments relative to their other financial assets. Additionally, the findings suggest that those with greater conscientiousness and agreeableness are less likely to hold stock investments and tend to hold smaller proportions of stock investments relative to other financial assets. Last, the results indicate that those with greater openness and extraversion are more willing to take financial risks, whereas those with greater conscientiousness and agreeableness display less willingness to take financial risks.

show abstract

Market Volatility and Financial Satisfaction: The Role of Financial Self-Efficacy

Cited by 54 publications

References 20 publications

Two‐factor risk preference for investment market and credit card risk

Two‐factor risk preference for investment market and credit card risk

Exploring the relationship between investors' financial literacy and advisor use with securities‐based loans

Personality, financial risk‐taking attitude, and older individuals' stock investment decisions

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