Impact of Behavioral Biases in Financial Risk Tolerance Ability of Mutual Fund Investors

2021 ◽  
Vol 7 (5) ◽  
pp. 2748-2765
Author(s):  
Nidhi Jain ◽  
Bikrant Kesari
Keyword(s):  
Mutual Fund ◽  
Financial Risk ◽  
Positive Impact ◽  
Investment Decision ◽  
Central India ◽  
Risk Tolerance ◽  
Behavioral Biases ◽  
Asset Class ◽  
Level Of Knowledge ◽  
Financial Risk Tolerance

Objective: The Behavioral bias is the term that deals with the investors’ psychology about their investment decision with their investment expertise. Every individual is biased, according to standard economic theory by his behavior and experiences which are rational. Methods: This research seeks to segregate mutual fund holders into various groups (persons and professionals) based on Behavioral biases and then investigates whether these Behavioral biases are influencing the level of knowledge of investors and the financial risk tolerance of certain mutual funds. Statistical tools compare investors characteristics and analyse how Behavioral biases are associated. Results: The factors analysed are financial circumstance, Type of Investors, Asset class preference, Time Horizon and Purpose of Investment. The primary information was gathered from 250 Central India mutual fund investors dependent on Judgment sampling. CFA, Correlation, MANOVA and Regression. Conclusions: Findings shows the effect of the behavior bias has positive impact on mutual fund investor awareness and financial risk tolerance.

scholarly journals Impact of Financial Knowledge and Investment Experience on Investment Decision Making with and without Risk Tolerance Mediation

2020 ◽  
Vol 6 (1) ◽  
pp. 1
Author(s):  
Muhammad Aslam ◽  
Muhammad Faisal Gulzar ◽  
Muhammad Aamir Shahzad ◽  
Muarif Maqbool ◽  
Muhammad Hassan Chaudhary
Keyword(s):  
Decision Making ◽  
Financial Risk ◽  
Statistical Tests ◽  
Investment Decision ◽  
Risk Tolerance ◽  
Financial Knowledge ◽  
Investment Decision Making ◽  
Investment Experience ◽  
The Impact ◽  
Financial Risk Tolerance

This research will explore the relationship between financial knowledge, investment experience, and investment decision making. The primary dataset was obtained from the investors in Pakistan stock exchange located in the city of Lahore, Punjab, Pakistan. The random sampling technique was used for the respondent selection. The comprehensive questionnaire contains the nominal, ordinal categorical scales for a survey response. The normality & reliability of the data were further verified by the statistical tests. The results estimated using the multiple regression analysis will be revealed in this study. This research will study the impact of the financial knowledge on investment decision making with and without the financial risk tolerance. Financial risk tolerance plays a mediating role during the process.

scholarly journals Interactive Impact of Demographic Variables and Personality Type on Risk Tolerance

2019 ◽  
Vol 5 (1) ◽  
pp. 42-54 ◽  
Author(s):  
Heena Thanki ◽  
Narayan Baser
Keyword(s):  
Marital Status ◽  
Financial Risk ◽  
Investment Decision ◽  
Real Life ◽  
Personality Type ◽  
Type A ◽  
Investment Strategy ◽  
Demographic Variables ◽  
Risk Tolerance ◽  
Financial Risk Tolerance

Investors’ investment decision is much dependent on his/her risk-taking capability, which in turn depends on a variety of factors. Majority of the studies carried out on this topic associate the financial risk tolerance (FRT) with demographics (gender, marital status, age, education income, etc.) of the investor. A handful of the studies on this topic establish a link between FRT and personality type. FRT refers to the investors’ ability to allow the uncertainty of returns while taking their investment decision. Most of the past studies on the related topics have taken Myers-Briggs Type Indicators (MBTI) or big five personality types, whereas the present study has taken Personality type A and B for finding its association with risk tolerance level. Identifying Personality type A and B is much easier and less time-consuming as compared to other models. Hence, in real life, financial planners also can use the outcome of this study in preparing the investment strategy for their clients. Past studies have focused either on demographics or on personality type, while the current study combines the effect of both the variables and adds to the existing literature. The present study adopts a single cross-sectional descriptive research design. To satisfy the objective, required data were gathered through a structured questionnaire with a “Financial Risk Tolerance Scale,” “Personality Scale,” and basic demographic questions using a convenience sampling methodology. An analysis of data indicates that personality type and demographic variables such as gender, marital status, occupation, and income are found significant in determining FRT of investor, while age and education are found insignificant.

Impact of Risk Tolerance and Demographic Factors on Financial Investment Decision

GIS Business ◽  
2018 ◽  
Vol 13 (5) ◽  
pp. 31-40
Author(s):  
Mitali Baruah ◽  
Abhishek Kirit kumar Parikh
Keyword(s):  
Financial Risk ◽  
Investment Decision ◽  
Demographic Factors ◽  
Demographic Variables ◽  
Risk Tolerance ◽  
Extensive Literature ◽  
Financial Investment ◽  
Financial Decisions ◽  
The Impact ◽  
Financial Risk Tolerance

Risk tolerance is popularly used in the personal financial planning industry to understand an investor’s attitude towards risk. In the twenty-first century, it is very important for the various investment firms, fund managers, financial planners to understand financial investment decisions of an investor for developing a strategy for the sale of their investment products in market. However, financial decisions of an individual not only depend on financial risk-tolerance level, but also upon different demographic factors. Thus, this study is undertaken to develop a model that helps in understanding impact of risk tolerance and demographic factors jointly on investment decision, especially, a decision related to level of investment. Also, investor may be having higher risk tolerance for the calculative investment but may be having lover risk tolerance in speculative investment. So, based on extensive literature support, this research has tried to propose a model for understanding the impact of investment risk tolerance, capital risk tolerance, speculative risk tolerance, and six important demographic variables jointly on investment decision. Thus, this study would be helpful to investment firms in understanding impact of risk tolerances and demographic variables jointly on level of investment of investors, which can be used for designing a strategy or investment product to offer to the investors with different levels of financial risk tolerance and different demographic profiles.

Demographic Variables, Delay Discounting Models and Dysfunctional Personality Traits as Predictors of Financial Risk-Tolerance Among Community-Dwelling Italian Adults

2021 ◽  
pp. 026010792110321
Author(s):  
Antonella Somma ◽  
Rebecca Sergi ◽  
Chiara Pagliara ◽  
Clelia Di Serio ◽  
Andrea Fossati
Keyword(s):  
Personality Traits ◽  
Linear Combination ◽  
Delay Discounting ◽  
Financial Risk ◽  
Short Form ◽  
Demographic Variables ◽  
Risk Tolerance ◽  
Community Dwelling ◽  
Self Report ◽  
Financial Risk Tolerance

To evaluate the effect of demographic variables, delay discounting and dysfunctional personality traits on financial risk tolerance (FRT), 281 community-dwelling adults were administered the Italian translations of the Risk-Tolerance Scale (RTS), Monetary Choice Questionnaire, Probability Discounting Questionnaire, and Personality Inventory for DSM-5-Short Form (PID-5-SF) self-report questionnaires through an online platform. Hierarchical robust regression results showed that the linear combination of demographic variables (gender and active worker status), delay discounting measures and selected PID-5-SF trait scale scores (i.e., Attention Seeking and Risk Taking) explained roughly 39% of the RTS total score. As a whole, our findings underscore the role of demographic characteristics, dysfunctional personality traits and delay discounting in FRT expression. As a result, FRT is likely to represent the linear combination of several factors that should be assessed in order to understand FRT and prevent erroneous choices among lay investors.

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