Behavioural propensities and financial risk tolerance: the moderating effect of ethnicity

2019 ◽  
Vol 15 (4) ◽  
pp. 728-745 ◽  
Author(s):  
Mahfuzur Rahman ◽  
Mohamed Albaity ◽  
Che Ruhana Isa
Keyword(s):  
Social Interaction ◽  
Undergraduate Students ◽  
Financial Risk ◽  
Design Methodology ◽  
Risk Tolerance ◽  
Moderating Effect ◽  
Business Economics ◽  
Content Type ◽  
Financial Risk Tolerance ◽  
The Relationship

Purpose The purpose of this paper is to explore the influence of several core behavioural propensities on financial risk tolerance (FRT). Additionally, this paper examines the moderating effect of ethnicity on the relationship between behavioural propensities and FRT. Design/methodology/approach A sample of 1,204 completed and usable questionnaires were collected from undergraduate students majoring in business, economics and finance and analysed them using SmartPLS 2.0 software. Findings The findings reveal that propensity for trust has the highest impact on FRT followed by propensity for regret and happiness in life, while propensity for social interaction is not significantly associated with FRT. Ethnicity significantly moderates the relationship between three behavioural propensities (propensity for regret, propensity for trust and happiness in life) and FRT. Originality/value This study contributes to the assessment of individuals’ FRT incorporating behavioural propensities, which in turn contributes to the field of behavioural finance.

Do sensation seeking, control orientation, ambiguity, and dishonesty traits affect financial risk tolerance?

2015 ◽  
Vol 42 (1) ◽  
pp. 34-41 ◽  
Author(s):  
Alan Wong ◽  
Bernie Carducci
Keyword(s):  
Locus Of Control ◽  
Personality Traits ◽  
Sensation Seeking ◽  
Financial Risk ◽  
Risk Tolerance ◽  
Ambiguity Tolerance ◽  
Criterion Variable ◽  
Content Type ◽  
Financial Risk Tolerance ◽  
The Relationship

Purpose – The purpose of this paper is to determine relationships between financial risk tolerance and the personality traits of sensation-seeking, locus of control, ambiguity tolerance, and financial dishonesty. Design/methodology/approach – A pretested questionnaire was used to gather information from 255 respondents. With risk tolerance as a criterion variable and the four personality traits as predictor variables, a regression procedure was performed to determine which variables contributed to the variability of the criterion variable and the extent of such contribution. An analysis was also done to find out whether gender, age, GPA, and academic standing had an influence on each personality trait’s contribution to risk tolerance. Findings – Risk tolerance is directly related to sensation-seeking and the link is so strong that it is not mitigated by the effects of gender, age, GPA, and college academic standings. As for locus of control, the more one believes one has control over one’s outcome, the higher risk one can tolerate. Surprisingly, there is no relationship between risk and ambiguity tolerances. Dishonesty also does not affect risk tolerance behavior. However, the relationship is found to exist among younger individuals and those with lower GPA, possibly due to not having reached an adequate level of matured or critical reasoning yet. Originality/value – The relationship between risk tolerance and sensation-seeking is an established fact but whether the relationship still holds across several demographic groups is part of this study’s focus. Although much has been done on risk tolerance, very little has been done on its relationship to locus of control, ambiguity tolerance, and financial dishonesty.

Personality, risk tolerance and social network use: an exploratory study

2016 ◽  
Vol 42 (6) ◽  
pp. 536-552 ◽  
Author(s):  
Shaista Wasiuzzaman ◽  
Siavash Edalat
Keyword(s):  
Social Networks ◽  
Social Network ◽  
Online Social Networks ◽  
Financial Risk ◽  
Ordinary Least Squares ◽  
Risk Tolerance ◽  
Network Activity ◽  
Least Squares Regression ◽  
Content Type ◽  
Financial Risk Tolerance

Purpose – The vast amount of information available via online social networks (OSN) makes it a very good avenue for understanding human behavior. One of the human characteristics of interest to financial practitioners is an individual’s financial risk tolerance. The purpose of this paper is to look at the relationship between an individual’s OSN behavior and his/her financial risk tolerance. Design/methodology/approach – The study uses data collected from a sample of 220 university students and the backward variables selection ordinary least squares regression analysis technique to achieve its objective. Findings – The results of the study find that the frequency of logging on to social network sites indicates an individual who has higher financial risk tolerance. Additionally, the increasing use of social networks for social connection is found to be associated with lower financial risk tolerance. The results are mostly consistent when the sample is split based on prior financial knowledge. Originality/value – To the authors’ knowledge this is the first study which documents the possibility of understanding an individual’s financial risk tolerance via his/her social network activity. This provides investment/financial consultants with more avenues for gathering information in order to understand their current or potential clients hence providing better services.

scholarly journals The Effect of Financial Risk Tolerance and Family Income on Entrepreneurial Intention in Higher Education Sector of District Swabi

2021 ◽  
Vol VI (I) ◽  
pp. 24-37
Author(s):  
Rehan Zeb ◽  
Naveed Hussain Shah ◽  
Muhammad Arif
Keyword(s):  
Higher Education ◽  
Sample Size ◽  
Financial Risk ◽  
Family Income ◽  
Entrepreneurial Intention ◽  
Risk Tolerance ◽  
Education Sector ◽  
Public And Private ◽  
Financial Risk Tolerance ◽  
The Relationship

The study examines the effect of family income (FI) and financial risk tolerance (FRT) on entrepreneurial intention in students of Universities of the Higher Education Sector located in district Swabi. This is an explanatory and co relational study carrying a sample size of 330 out of the total of all 501 students from public and private Universities in Swabi. Financial determinants are prominent aspects of the study contributing to entrepreneurial intention. The study has established the relationship between FI and FRT on EI of universities of the Higher Education Sector located in district Swabi. The study is a contribution to the rare work on the relationship between financial determinants and entrepreneurial intention. The study revealed that FI and FRT significantly affect EI, whereas the order of contribution of these determinants on EI are evident their coefficients are FRT and FI.

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.

Making meaning out of noise

2017 ◽  
Vol 47 (4) ◽  
pp. 506-521 ◽  
Author(s):  
Jorge Cegarra-Sánchez ◽  
Juan-Gabriel Cegarra-Navarro
Keyword(s):  
Student Achievement ◽  
Professional Learning Communities ◽  
Empirical Study ◽  
Learning Communities ◽  
Professional Learning ◽  
Undergraduate Students ◽  
Design Methodology ◽  
Making Meaning ◽  
Content Type ◽  
The Relationship

Purpose The environments provided by classrooms to facilitate learning among students can be seen as useful vehicles for making meaning out of gossip, lies, exaggeration and partial truths (i.e. counter-knowledge). This paper aims to focus on professional learning communities as a process to counteract the problem of counter-knowledge. Design/methodology/approach This paper has analysed the relationships between professional-learning communities and counter-knowledge using an empirical study of 210 undergraduate students to identify whether there is a significant impact on student achievement by professional learning communities. This study uses PLS-Graph software version 3.0 to conduct an analysis of the data collected. Findings Outcome findings support that professional learning communities provide a way of counteracting counter-knowledge and the noise heard through gossip, lies, exaggeration and partial truths. Originality/value Results also confirm that counter-knowledge is a variable that, when controlled, has the effect of strengthening the relationship between learning and student achievement.

Self-Assessments of Risk Tolerance by Women and Men

2007 ◽  
Vol 100 (3) ◽  
pp. 795-802 ◽  
Author(s):  
John E. Grable ◽  
Michael J. Roszkowski
Keyword(s):  
Financial Risk ◽  
Rating Scale ◽  
Risk Tolerance ◽  
Convenience Sample ◽  
Self Rating ◽  
Internet Users ◽  
Point Rating Scale ◽  
Self Assessments ◽  
Financial Risk Tolerance ◽  
The Relationship

A convenience sample of 1,741 Internet users completed a 12-item financial risk-tolerance questionnaire. They also rated themselves on their tolerance for financial risk using a 4-point rating scale. The 12-item summated rating score was used to predict the self-rating. The residual between actual and predicted self-rating was compared by sex. The residual for males was positive, indicating that men tended to overestimate their proclivity for taking risks. Conversely, the residual for females was negative, suggesting that women underestimate their tolerance for risk. The relationship held when controlling for other factors linked to risk tolerance, i.e., age, household income, marital status, and education. It was also noted that risk tolerance was overestimated by younger respondents and those with a graduate education.

Stock Market Volatility and Changes in Financial Risk Tolerance During the Great Recession

2017 ◽  
Vol 28 (1) ◽  
pp. 140-154 ◽  
Author(s):  
Abed G. Rabbani ◽  
John E. Grable ◽  
Wookjae Heo ◽  
Liana Nobre ◽  
Stephen Kuzniak
Keyword(s):  
Great Recession ◽  
Financial Risk ◽  
Risk Tolerance ◽  
Market Volatility ◽  
Stock Market Volatility ◽  
The Great Recession ◽  
Standard And Poor's ◽  
Changes In Risk ◽  
Financial Risk Tolerance ◽  
The Relationship

This study investigated the degree to which the financial risk tolerance of individuals was influenced by volatility in the U.S. equities market during the period of the Great Recession. Based on data from a valid and reliable risk tolerance scale and return information for the Standard and Poor’s (S&P) 500 index, there does appear to be some associations between daily market volatility and changes in risk tolerance scores. Changes in risk tolerance scores were also calculated using short- and intermediate-term volatility measures. The relationships do vary, however, with evidence supporting the relationship only 64% of the time. Overall, changes in financial risk tolerance scores were found to be modest. Although not following hypothesized directions at all times, risk tolerance was not influenced by the length of volatility measurements.

Moderating Effect of Demographic Variables on the Relationship Between Personality Traits and Financial Risk Tolerance

2018 ◽  
pp. 122-135
Author(s):  
Sasmita Mishra ◽  
Manit Mishra
Keyword(s):  
Regression Analysis ◽  
Personality Traits ◽  
Financial Risk ◽  
Demographic Variables ◽  
Risk Tolerance ◽  
Stepwise Multiple Regression ◽  
Hierarchical Regression ◽  
Retail Investors ◽  
Financial Risk Tolerance ◽  
The Relationship

This paper explores the relationship between financial risk tolerance and its determinant – the personality traits of retail investors. This paper also explores the moderating effect of major demographic variables like gender, age and income on the relationship between financial risk tolerance personality traits of retail investors. Stepwise multiple regression analysis and Hierarchical regression analysis was used to identify patterns in the data obtained from 261 respondents. The Stepwise multiple regression analysis established a negative association of Conscientiousness with financial risk tolerance of retail investors. The hierarchical regression analysis suggested a major impact of conscientiousness on financial risk tolerance among young Indian investors.

Market discipline in the behavioral finance perspective: a case of Sharia mutual funds in Indonesia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Umi Widyastuti ◽  
Erie Febrian ◽  
Sutisna Sutisna ◽  
Tettet Fitrijanti
Keyword(s):  
Mutual Funds ◽  
Behavioral Finance ◽  
Financial Literacy ◽  
Financial Risk ◽  
Market Discipline ◽  
Risk Tolerance ◽  
Exogenous Variables ◽  
Content Type ◽  
Withdrawal Behavior ◽  
Financial Risk Tolerance

Purpose This study aims to determine antecedents of market discipline. A model was constructed by extending the theory of planned behavior (TPB) to explore the cognitive, psychological and social factors that influence the market discipline in the form of withdrawal behavior. Design/methodology/approach This study applied a quantitative approach by surveying 181 Indonesian retail investors in Sharia mutual funds, which were represented by civil servants. The samples were collected using the purposive sampling technique. This study used the partial least square–structural equation model to analyze the data. Findings The results revealed that the Islamic financial literacy, the attitudes toward withdrawal, the subjective norms and the perceived behavioral control had a positive significant effect on the withdrawal intention, whereas financial risk tolerance had an insignificant impact. Then, all the exogenous variables and intention to withdraw had a significant contribution in explaining market discipline. Contrary to the proposed hypothesis, the attitude toward withdrawal had a negative impact on market discipline. The structural model indicated that the TPB could be extended by adding some exogenous variables (i.e. Islamic financial literacy and financial risk tolerance) in determining the intention to withdraw and withdrawal behavior, which indicated the market discipline in Sharia mutual funds. Research limitations/implications This study was limited to individual investors who work as civil servants. This study did not accommodate different demographic factors such as age and gender, which influence fund withdrawal behavior. Practical implications The government must focus on the inclusion of market discipline in Sharia mutual funds’ regulation to encourage the risk management disclosure, specifically that related to Sharia compliance. Originality/value Previous studies applied a traditional finance theory to predict market discipline, but this study contributes to filling the theoretical gap by explaining the market discipline from a behavioral finance perspective that was found in Sharia mutual funds.

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