Investment Risk Tolerance amongst South African University Students in the Vaal Triangle Area

Antonios Evangelou,Sune Ferreira-Schenk,Elizabeth Bothma,Lorainne Ferreira

doi:10.32479/ijefi.11567

Antonios Evangelou, Sune Ferreira-Schenk + Show 2 more

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https://doi.org/10.32479/ijefi.11567

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Abstract

Analysing students risk tolerance during the investor life cycle is imperative to students and financial planners alike, to facilitate the implementation of suitable investments and investment strategies. Students in universities do not have the required knowledge to invest and this is why an investment framework was created to assist, guide and inform students of what stage of the individual investor life cycle that they are in and suggest suitable investment strategies. The article implemented a quantitative approach, using secondary data analysis. The data used for the analysis is from a self-administered questionnaire in 2017 that was distributed to a sample of 396 students from two higher education institutions in the Vaal Triangle region. Two validated risk tolerance scales were used to analyse students risk tolerance levels. The objective of this paper was to determine the risk tolerance levels of students in the Vaal Triangle region. The two results from the 13-item scale and the single-item scale for measuring risk tolerance indicated that the students have a medium risk tolerance level.

Highlights

Risk tolerance is one of the most comprehensive concepts used in the financial industry and a fundamental factor that needs to be taken into consideration when planning an individual’s investment strategy (Rutgers, 2014)
The two results from the 13-item scale and the single-item scale for measuring risk tolerance indicated that the majority of the participants have a medium (GLR-TS), and average to above average (SCF) risk tolerance level
This article states that participants have a medium risk tolerance level

Summary

Introduction

Risk tolerance is one of the most comprehensive concepts used in the financial industry and a fundamental factor that needs to be taken into consideration when planning an individual’s investment strategy (Rutgers, 2014). An individual’s life experiences, to some extent, are linked with his/her understanding of the relationship between risk and return (Crouhy et al, 2014). These life experiences will play an important role in an individual’s income, available capital, liquidity requirements, knowledge about investments, emotional resilience, as well as their attitude towards price volatility (Fredman, 1996; Hanna and Chen, 1997)

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