The Perception and Knowledge of Financial Risk of the Portuguese

Fernando Tavares,Vanessa Ratten,Vasco Tavares,Eulália Santos

doi:10.3390/su12198255

Abstract

This study will help academics, researchers, and professionals to better understand how the Portuguese population perceives financial risk. Thus, the main objective of this study is to analyse and compare the perception and knowledge of financial risk by the Portuguese. The methodology used is quantitative, and the measurement instrument consists of three parts: financial risk perception, financial risk knowledge and sociodemographic characterization of the participants. The sample is composed of 830 Portuguese individuals, over 18 years old. The results demonstrate that financial risk perception is a one-dimensional measurement and that there are low levels of both perception and knowledge of financial risk. It can also be concluded that the Portuguese individuals have a higher level of financial risk perception, when compared to financial risk knowledge, and it is men who have higher levels of perception and knowledge of financial risk. Thus, this study contributes to the literature on financial risk by presenting empirical evidence and relevant conclusions, and it is therefore expected that it will help to improve the perception and knowledge of the financial risk of the Portuguese and, consequently, their financial decisions and financial well-being. Therefore, the study fills a gap, since there are no studies in Portugal that assess the perception and knowledge of financial risk of the Portuguese.

Highlights

An individual’s life is impacted by their level of financial risk and willingness to engage in financial risk-taking activities
The result of the study on the sensitivity of the 5 items related to the perception of financial risk showed that the skewness (|Sk| ≤ 3) and kurtosis (|Ku| ≤ 7) coefficients are within the adequate parameters to proceed with the application of the exploratory factor analysis (EFA)
This article has focused on understanding financial risk by analysing individuals perceptions [32]

Summary

Introduction

An individual’s life is impacted by their level of financial risk and willingness to engage in financial risk-taking activities. Perception of risk influences an individual‘s investment decision, even when decision makers present high levels of financial literacy and knowledge. Investors with high levels of risk perception and tolerance and solid financial knowledge make good investment decisions. This means that, increasingly, the management of risk is becoming a necessity of a sustainable economy. This is due to sustainability issues related to economic and market environments being analysed from a risk perspective. This means more financial reporting regarding sustainability is incorporating financial risk analysis tools. In a report on the financial literacy of the Portuguese, the Bank of Portugal [1] refers that, about perception:

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Results

Conclusion