Abstract
High financial risk tolerance level encourages investors’ participation in financial market. Thus, elevate their capabilities to achieve their financial goals and support national economic growth and well-being. This paper aims to investigate the factors affecting financial risk tolerance from studies around the globe. A comprehensive review of financial risk tolerance is carried out with a particular attention on factors that impact financial risk tolerance on financial decisions. This study indicates that financial risk tolerance can be explained by demographic profiles, psychology, social, geographical differences, and financial capability factors. These findings will be useful to professionals, technologists, and financial institutions to identify potential investors based on the indicators concluded with the suggestion on financial technology (FinTech) utilisation. Hence, encouraging participation in the Malaysian financial market during global health crisis and reaching economic well-being towards industrial revolution 4.0 (IR 4.0).
Highlights
Financial risk tolerance (FRT) can be explained by the amount of risk a person is willing to take when making a financial decision or investment (Ferreira & Dickason, 2018)
This study has revealed the factors that give an impact on FRT
Lower financial risk tolerates groups can be identified by investment firms to provide investment education in order to increase the FRT level amongst investors and potential investors
Summary
Financial risk tolerance (FRT) can be explained by the amount of risk a person is willing to take when making a financial decision or investment (Ferreira & Dickason, 2018). Prior research studies paid less attention to a comprehensive investigation that reviews research articles on factors that give impacts on FRT. This study aims to fill the gap by investigating factors that affect FRT from around the world. A study by Bannier and Neubert (2016) stated that higher risk tolerance relates positively to both standard and sophisticated investments for men, but only to standard investments for women. There is no relation between risk tolerance with women’s sophisticated investments. Such conclusion is expected as men are the main breadwinners of households. Their participation in financial markets is one of the ways to multiply their incomes
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