The Influence Of Birth Order On Financial Risk Tolerance

Abstract

This study examines birth order as a predictor of financial risk tolerance. Three hundred sixty-eight individuals, drawn predominantly from a large university in the Southwestern United States, completed a psychometrically sound financial risk tolerance measure (Grable and Lytton, 1999). The results confirmed previous literature in regard to gender and education as predictors of risk tolerance. However, for the first time, firstborn individuals were shown to be significantly less risk tolerant than later-born individuals. Furthermore, it was shown that later-born males were more likely than the first-born to have a majority of their portfolios allocated in stock; additionally the later-born males were more likely than the later-born females to hold a greater proportion of their assets in stocks.

Factors associated with financial literacy among high school students in New Zealand

“…This instrument has been widely used (see for example, Grable, 2000;Grable and Lytton, 2003;Chatzoglou, 2010;Gilliam and Chatterjee, 2011). The instrument itself consists of 20 multiple-choice questions.…”

Born to Take Risk? The Effect of CEO Birth Order on Strategic Risk Taking

“…A growing body of research, however, has also suggested that birth order influences an individual's risk-taking propensity, an important and stable aspect of personality outside of the Big Five 2 (Frey, Pedroni, Mata, Rieskamp, & Hertwig, 2017;Nicholson, Soane, Fenton-O'Creevy, & Willman, 2005) that indicates an individual's tendency to engage in risk across contexts. For example, birth order has been shown to be positively associated with risky behaviors, such as risky adolescent behaviors (Argys et al, 2006), participation in risky sports (Nisbett, 1968), and risky financial decisions (Gilliam & Chatterjee, 2011). Meta-analytic evidence, albeit in the sports context, has suggested that birth order's relationship with risk-taking propensity may even be stronger than its relationship with other personality aspects, such as the Big Five (Sulloway & Zweigenhaft, 2010) CEO BIRTH ORDER AND STRATEGIC RISK TAKING…”

“…Scholars have also examined the relationship between birth order and risk taking in the business context. Gilliam and Chatterjee (2011), for example, surveyed students and found that later-borns were more willing to make risky investments. Morgan (2009) examined financial investments decisions, and found that later-borns tend to take greater financial risks and are more willing to gamble for a higher payoff.…”

“…That said, scholars have found that CEO gender may alter important relationships in the upper echelons (e.g., Jeong & Harrison, forthcoming); thus, future research might examine how birth order impacts male versus female CEOs in samples where there are enough female CEOs to have adequate power. Given that many scholars have examined birth order in samples that included both male and females, we expect scholars to find that birth order effects persist for female CEOs, albeit with potentially weaker effects suggested by prior work (e.g., Argys et al, 2006;Gilliam & Chatterjee, 2011) Finally, we did our best to control for as many relevant factors as possible; however, we were not able to control for some factors that might serve as potential confounds. For example, we were not able to examine other TMT members' birth order given that these individuals were typically not family members and thus their birth order and sibling data were not publicly available.…”

No effect of birth order on adult risk taking

“…1, p. 433): Later-borns select more dangerous sports than firstborns, and, when they choose the same sport, they take more risks when playing that sport. In the same vein, one small-scale self-report study of financial risk tolerance (n = 368) found that firstborns have a lower risk tolerance than later-borns, and are less likely to allocate a majority of their assets to stocks (14). Another small-scale study (n = 200), however, found no effect of birth order on self-reported risk behaviors [e.g., birth control, unprotected sex (15)].…”