Abstract
To construct and validate a psychological measure called the Financial Risk-Taking Scale (FRTakS) and to translate, adapt, and validate a psychological measure called the Financial Risk Tolerance Scale (FRTolS) with a Brazilian sample. Exploratory and confirmatory factor analyses were used to assess evidence of the validity of the scales' internal structures. We also tested the convergent validity between FRTakS and FRTolS. After construction (FRTakS) and adaption (FRTolS), the instruments were evaluated by expert judges for the relevance of their items to the scales, followed by pretesting. A cross-sectional study was then conducted using a convenience sample of 834 people who responded to invitations sent to a mailing list or to an online invitation on the Brazilian Securities and Exchange Commission website (Comissão de Valores Mobiliários [CVM]). Mean age of participants was 39.27 years (standard deviation [SD] = 10.82), they had high educational level (60.9% post-graduate), were married or living together (60%), and their spending power was 41.36 (SD = 13.27). Exploratory and confirmatory analysis identified two factors in FRTakS (Investment and Spending Money), both with 4 items; and identified a single factor in FRTolS, comprising 7 items. Reliability indexes for the goodness of fit of the factor structure were satisfactory. There was a positive and significant correlation between the FRTakS Investment factor and FRTolS, confirming convergent validity. The results suggest the existence of a two-dimensional factor structure for FRTakS, and a one-dimensional factor structure for FRTolS. The instruments also exhibited convergent validity with each other.
Highlights
The perspective on risk-taking in finance considers it to be an individual inclination, in a given context, to choose risky options over safer ones
A cross-sectional study was conducted with a convenience sample of 834 people, mostly male (68.3%) who responded to an invitation sent to the Securities and Exchange Commission of Brazil (Comissão de Valores Mobiliários [CVM]) mailing list or an online invitation on the website
Risk-taking The initial instrument consisted of 18 items, originating from the following scales: 1) Eight items from the DOSPERT9 financial factor, translated into Portuguese.16 2) Four items from the Specific Risk Propensity Scale.6 3) We used three items developed by the authors, but these were excluded after statistical analysis, considering our objective of constructing a new instrument
Summary
The perspective on risk-taking in finance considers it to be an individual inclination, in a given context, to choose risky options over safer ones. The risky option is defined by its multiple possible outcomes while the safe option is defined by a single predicted outcome.[1] Within the aspect of individual inclination, previous researches have pointed out that individual financial risk tolerance is an important variable that influences financial decision-making, especially in the context of uncertainty. Financial risk tolerance is related to how much a person can bear possible losses or to the volatility of a choice.[2] Risk-taking and risk tolerance are directly and positively associated constructs, since risk tolerant individuals tend to engage in more risky behaviors.[3] A theoretical model proposed by Grable[4] predicts that risk tolerance works as a mediator between risk profile, risk perception, risk need, and choice of risky behavior
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