Financial Risk Tolerance Research Articles

Theory of Planned Behavior: The Effect of Financial Literacy and Risk Tolerance on Investment Intention

Research Aims: This research aims to analyze how factors such as attitude, subjective norms, perceived behavioral control, financial literacy, and risk tolerance influence the investment intentions of university students. By focusing on these variables, the study seeks to provide a comprehensive understanding of the determinants of investment behaviors among this demographic.
 Design/methodology/approach: Utilizing the Theory of Planned Behavior as a guiding framework, the study employed a quantitative research approach. A survey, comprising structured questionnaires, was administered to a sample of students currently enrolled at the University of Lampung. The responses were then analyzed using multiple linear regression to identify significant predictors of investment intentions.
 Research Findings: The analysis revealed that attitude and perceived behavioral control are significant predictors of investment intention among University of Lampung students. Contrary to expectations, subjective norms, financial literacy, and individual risk tolerance did not show a significant direct influence on the investment intentions of the participants.
 Theoretical Contribution/Originality: This study contributes to the body of knowledge in financial behavior theory by contextualizing the Theory of Planned Behavior in the realm of student investment intentions. It offers original insights into the relative importance of various psychological and educational factors in shaping investment behavior among university students, a demographic that is often underrepresented in financial behavior research.

A Critical Review of Research on Financial Risk Tolerance

This paper conferred the objective to conduct a critical review of research on Financial Risk Tolerance. A total of 58 research papers were reviewed and published between 2000 and 2022. This investigation has been split into three sections. Firstly, focused on various types of personality. Secondly, have to do with Six demographic variables, and the remaining with various objectives. Tables and graphs were used to demonstrate the basis of the year of publication, the belonging country, the types of data, the objectives of the research, and the statistical tool used. Findings show that more no. of research had been done during the last decade, and India shares the most no. of research papers. Nearly 75% of research is based on primary data. Grable’s 13-item questionnaire and 5-point Likert Scale are used often. Descriptive Statistics, Cronbach alpha, correlation, and regression are a few most common tools utilized in research papers.

Do Emotions Influence the Investment Decisions of Generation Z Surabaya Investors in the Covid-19 Pandemic Era? Does Financial Risk Tolerance Play a Moderating Role?

Do Emotions Influence the Investment Decisions of Generation Z Surabaya Investors in the Covid-19 Pandemic Era? Does Financial Risk Tolerance Play a Moderating Role?

Beyond age stereotypes: Unveiling the investment intentions of young individuals during the COVID-19 pandemic

This study examines personality traits, financial literacy, and risk tolerance for investment intentions. In addition, this study also examines the role of risk tolerance as a mediator in the influence of personality traits on investment intentions. A quantitative research method is used to measure personality traits, financial literacy, risk tolerance, and investment intention. A survey was conducted among young individuals in Indonesia. Respondents came from various regions in Indonesia, especially those from Java, Indonesia. The number of samples was 405 questionnaires. The results show that several personality traits, such as extraversion, neuroticism, and openness, affect investment intentions. However, the results show conscientiousness and agreeableness do not affect investment intentions. Researchers have found that extraversion and conscientiousness do not affect risk tolerance, but neuroticism, openness, and agreeableness do. Financial literacy and risk tolerance are also proven to affect investment intentions. When the mediation effect was tested, it was found that neuroticism, openness, and agreeableness affect investment intentions. On the other hand, risk tolerance does not act as a mediator variable between extraversion and investment intention. The practical implication of the study lies in assisting stock exchanges in developing countries to craft effective strategies for attracting Generation Z and Alpha investors, particularly during periods of economic volatility.

Financial literacy and sustainability in SMEs: Do financial risk attitude, access to finance, and organizational risk-taking tolerance mediate?

Small and medium-sized enterprises (SMEs) contribute significantly to the economic growth of emerging economies. However, SMEs have difficulty maintaining their performance. This paper examines the impact of financial literacy on the sustainability of SMEs with the roles of access to finance, financial risk attitude, and organizational risk-taking tolerance as mediators. This study concentrated on the Indonesian market and used questionnaires to collect data from the owners or chief financial officers of SMEs. The extent of the correlations was examined using partial least squares structural equation modeling. It was found that financial literacy, financial risk attitude, and organizational risk-taking tolerance are significant antecedents of SME sustainability. Access to finance, on the other hand, was not a factor in SME sustainability. A financial risk mentality was also revealed to have a substantial influence on the association between financial literacy and SME viability in the study. Furthermore, the relationship between financial literacy and SME viability was found to be mediated by organizational risk-taking tolerance. This study has significant relevance for SMEs, as it confirms that financial literacy is crucial for continued success. SMEs with proper financial literacy will have a superior attitude to financial risk and organizational risk-taking tolerance, ensuring their sustainability. Future studies can investigate SME sustainability in other emerging economies and compare their performance and sustainability.

The Influence of Emotions and Social Value Orientation on Risk Tolerance and Sustainable Investment Choices

Purpose - The intricacy of the decision-making process has increased due to the inherent uncertainty surrounding investments. Therefore, the study aims to investigate the impact of individuals' Social Value Orientation (SVO), Emotional Instability (EI), and demographic factors on their Financial Risk Tolerance (FRT) levels. Additionally, it aims to investigate whether SVO and EI influence the adoption of socially responsible investment (SRI) funds and the diverse investment choices made by individuals. Methodology - A convenient sampling technique was employed to gather data from 355 Indian retail investors through a structured questionnaire. Subsequently, the collected data was then examined and interpreted using binary logistic regression and chi-square tests facilitated by the SPSS 26 software. Findings - The results emphasize that SVO, EI, Age, Marital status and Gender are significant predictors of investors' FRT. Furthermore, our study unveils that investors with a pro-social mindset are more inclined to invest in SRI funds compared to those who prioritize themselves. Originality – The current study contributes to the existing literature by introducing a novel and unexplored variable, i.e., SVO, for academic consideration in risk tolerance. Moreover, this study imparts a profound understanding of behavioural finance by illuminating the influence of investors' values and emotions on their inclination to embrace risk. Social Implication - By examining investors' preferences and interests in SRI, we gain valuable insight into the growing importance of sustainable funds. This aligns harmoniously with the overarching pursuit of Sustainable Development Goals (SDGs), as these conscientious investment funds scrutinize and eliminate companies that harm society.

Linking Entrepreneurial Competencies and Financial Risk: Pathways to Sustainable Business Growth

This study explores the relationship between entrepreneurial skills and financial risk tolerance among ambulant vendors operating in informal economies. Focusing on key competencies such as self-competency, risk management, and control focus, the research aims to determine how these skills influence vendors’ willingness to engage in financial risks, a vital factor for business growth and sustainability. Data collected from 152 ambulant vendors in Agusan del Sur was analyzed using Pearson’s correlation and multiple regression. The results show a strong positive correlation between entrepreneurial skills and financial risk tolerance, with self-competency emerging as the most influential factor. With higher self-efficacy, entrepreneurs are more sure of handling financial uncertainty and grabbing chances. The study emphasizes acquiring entrepreneurial competencies to improve financial decision-making and corporate resilience. It also emphasizes the importance of focused training initiatives to improve these competencies, therefore providing information for stakeholders and legislators endorsing unofficial economies.

Disentangling the “crypto fever”: An exploratory study of the psychological characteristics of cryptocurrency owners

Cryptocurrencies are innovative digital assets that became significantly popular in recent years. Despite their popularity, literature about cryptocurrencies is still lacking. Specifically, little is known about the psychological profile of cryptocurrency owners. The present paper aims to investigate the role of financial literacy, self-efficacy, risk tolerance, and impulsivity in cryptocurrency ownership in a representative sample of 1,153 Italian consumers. In particular, a Latent Profile Analysis was performed on cross-sectional data to identify different psychological profiles of consumers, and test which of these profiles is more likely to hold cryptocurrencies. Results indicate the presence of six different psychological profiles and that the psychological profile that best describes those who hold cryptocurrencies is characterized by high levels of financial literacy, risk tolerance, and self-efficacy in investment domains. Instead, a configuration of low financial literacy and high self-efficacy, risk appetite, and impulsivity scores is mostly associated with having owned cryptocurrencies in the past. These findings would suggest that psychological characteristics play a key role in cryptocurrency ownership.

Exploring the Mediating Role of Financial Risk Tolerance between Heuristic Biases and Working Women Investors’ Investment Decisions

The increasing financial independence of working women has contributed to their growing interest in investment to enhance their wealth. Working women investors are prone to psychological biases and have a conservative approach to risk, which can affect their investment decisions (ID). The study explores the role of financial risk tolerance (FRT) as a mediator in controlling the link between heuristic biases and working women investors’ investment decisions. Three heuristic biases are investigated: representativeness, availability, and anchoring. A structured questionnaire has been used to procure data from 211 working women investors trading in the Indian stock market. PLS-SEM was used to determine the association between the constructs. According to the findings, representativeness has a positive impact on the women investors’ investment decisions as well as their financial risk tolerance, anchoring has a detrimental impact on working women investors’ investment decisions and their risk tolerance capacity, and availability positively influences women investors' risk tolerance. The ability to tolerate financial risk has a positive impact on the investment decisions of women investors. The results of the mediate study show that the risk tolerance ability of women investors partially mediates the interaction between heuristic biases and their investment decisions. This paper will assist women investors to become more aware of these heuristic biases and lessen their negative effects on their investment choices. Its further results in more precise evaluations of risk tolerance and, ultimately, more successful investment planning.

СРАВНИТЕЛЬНЫЙ АНАЛИЗ МЕТОДИК ОЦЕНКИ ВЛИЯНИЯ СОЦИАЛЬНО-ЭКОНОМИЧЕСКИХ ФАКТОРОВ НА УЧАСТИЕ НАСЕЛЕНИЯ НА ФОНДОВОМ РЫНКЕ

The article considers methodological approaches to assess the impact of socio-economic factors on the population’s participation in the stock market. The existing methodologies were analyzed in order to conduct the research. Analytical and comparative approach was used to assess the impact of socio-economic factors on the participation of the population in the securities market. The proposed methodology will allow specialists to assume the behavior of the investor and predict the course of his actions. Also through the analysis of these characteristics it is possible to conduct a more accurate research on the issue of financial literacy and risk tolerance.

Financial Literacy, Risk Tolerance, and Cryptocurrency Ownership in the United States

Financial Literacy, Risk Tolerance, and Cryptocurrency Ownership in the United States

Impact of socio-demographic factors on the self-assessed financial risk tolerance of investors

Impact of socio-demographic factors on the self-assessed financial risk tolerance of investors

The Big Five Personality Traits (OCEAN) and Financial Planning

Financial planning has moved beyond a purely economic model and now incorporates aspects of behavioral economics and counseling psychology to better serve clients. In this review, we suggest that personality psychology, particularly the Big Five or OCEAN model of general personality might also be useful in financial planning. Financial planners are well aware that different clients with different personalities bring different opportunities and challenges into the planning session, but planners might benefit from a more formal understanding of client personality. To this end, we describe the Big Five traits – Openness to experience, Conscientiousness, Extraversion, Agreeableness and Neuroticism or OCEAN – and the basic personality science surrounding them. We next examine how each of the OCEAN traits is associated with key financial outcomes including: income, net-worth or wealth, financial literacy, financial risk tolerance, and financial happiness. We discuss profiles of the Big Five traits, including Resilient, Under controlled, and Over controlled profiles. Finally, we discuss some potential benefits for of incorporating personality science into financial planning research and practice.

A Systematic Literature Review and Research Agenda of Financial Literacy, Investment Behavior and Risk Tolerance of Indian Women Investors

Purpose: This article systematically reviews the literature published in the last 20 years on Financial Literacy, Investment Behavior, and Risk Tolerance of Indian Women Investors and other related topics. The paper emphasizes recognizing and addressing gaps in existing research by posing specific queries for future studies. Methodology: A systematic literature review (SLR) has been conducted on a considerable amount of peer-reviewed research articles that were published over a span of two decades. This research article's significance is determined by analyzing the journal publication, year, statistical techniques used, citation analysis, and text analysis on the literature related to relevant areas. The survey on literature focuses on significant aspects such as financial literacy, investment behavior, risk tolerance levels, and preferred investment avenues for Indian women investors. Finally, both the research gap and research agenda are scrutinized for further studies. Findings/Result: Most studies have shown that Indian female investors are risk-averse and not willing to take significant risks. Indian women investors tend to prioritize safety over high returns when investing their funds. Their preferred investment options are ornamental gold and bank deposits because these investors have a poor level of awareness regarding the stock market and mutual fund investments. Originality/Value: This is one of the few significant studies on this topic as per the best knowledge of the author. This article is valuable in understanding the present status and the existing gap in the literature for academicians, researchers, and professionals in capital markets. Paper Type: Literature Review

Individual Investors Financial Risk Tolerance and Personality Traits. A Systematic Review and Future Research Direction

Purpose: Using a systematic literature review the papers investigated the relationship between various personality traits and the volatility of financial risk tolerance levels of investors. Further, the study analyzed and foundational work that has gone into making behavioural finance a well-established and distinct field of study over the years. The behavioural tendencies of individual investors, institutional investors, and financial advisors have also been included in this study. Design/Methodology/Approach: The research papers were assessed using the Scopus database, published journals, conference proceedings, and working papers, using keywords related to behavioural finance. These papers were gathered from 1967 which laid the groundwork for this subject to 2021. These articles are divided into categories according to personality traits, year, country, and author. All research instruments connected to primary and secondary data that writers have utilized have been shown in this paper Findings: The findings of this study suggest that research on financial markets has been overtaken by a new era of studying human emotions, behaviour, and attitudes. Moreover, not only are academics paying attention to this field, but so are corporations, financial intermediaries, and entrepreneurs. Individual and institutional investors, as well as financial advisors, are the primary focus of the research, but the behaviour of the financial intermediary through which most of these investors invest should also be examined. It allows researchers to focus on a smaller subset of the population while also examining emerging economies in search of new theories. The findings of this study have been described in the form of tables, which include the big five personality trait model and their impact on risk tolerance levels among investors. Research Limitations/Implications: Based on recent research, this study provides an overview of the most significant developments in this field. So far, there have been only a few comprehensive reviews of behavioural finance studies have been published. Now researchers in this field will benefit from this study's findings, as well as those who are looking for areas to focus their efforts. The use of only the Scopus database is the limitation of this study, the use of the web of science could have provided much more details. Practical implications: A practical implication of the research is that corporations, policymakers, and securities issuers can keep investors' interests in mind before introducing security s into the market. Social Implications: Investors can get well acquainted with their personality type and risk tolerance level which will help them in making better investment decisions and thereby reduce risk. Originality/Value: The focus of this work is the review of existing research on the big five personality trait model about the risk tolerance level of investors. The research is also based on investment decision-making literature. Some new concepts and theories of behavioural finance will be discussed in this paper in addition to the more established ones. Consequently, the study encourages readers to look for solutions that limit the impact of personality traits on risk tolerance and thereby in making decisions.

Mediating Effect of Pleasure-Seeking and Loss Aversion in the Relationship Between Phantasy and Financial Risk Tolerance and the Moderating Role of Confidence

Abstract Research background Deciding to trade in financial markets is psychologically difficult and wearing. Investors want to find rational justifications for the correctness of their decisions. However, there is uncertainty in financial markets. This uncertainty does not allow for mathematical calculations. In such case, feelings get involved in the decision process. Purpose This study aimed to investigate the mediating effect of two motivational systems (loss aversion and pleasure-seeking) on the effect of phantasy, which is fantasies that are based on an individual’s early infancy, that develop and exist throughout life, but are not consciously aware of by the individual, on financial risk tolerance, and to analyze the moderating effect of confidence in the effect of these two motivational systems on financial risk tolerance. Research methodology Data were collected from 1,643 subjects from Turkey in November–December 2021 using a questionnaire. The link to the survey prepared by the researchers was created using Google Survey and shared by our graduates’ students on their social networks. Results According to the results, phantasy had a positive and significant effect on both motivational systems and financial risk tolerance. Simultaneously, two motivational systems have a mediating effect on the relationship between phantasy and financial risk tolerance. Confidence, on the other hand, has a moderating effect on the effect of these two motivational systems on financial risk tolerance. In addition, as expected, phantasy showed its effect on all individuals without differing according to demographic variables. Despite this, loss aversion and low financial risk tolerance were higher in female and married individuals. While pleasure-seeking is higher in males, it does not differ according to marital status. Novelty Modeling unconscious processes, motivational systems and individual characteristics such as confidence together will provide important and useful findings for both investors and market authority in terms of showing the effect of unconscious and cognitive factors on financial risk tolerance.

The Effect of Financial Literacy on Risk Tolerance as an Intervening Variable Against Decision Making

This study aims to analyze the effect of financial literacy and risk tolerance as an intervening variable on decision making. The phenomenon in this study is how financial literacy influences risk tolerance as an intervening variable on decision making (a Makassar Investor study during the Covid-19 pandemic). This research was conducted during the Covid-19 Pandemic, starting at the end of 2019 until the end of 2020, so that phenomena related to financial literacy, risk tolerance, and decision making for investors in Makassar had not existed before. This research used the Structural Equation Model (SEM) method with the Smart PLS 3.0 software program, the data source is primary data from 290 investors registered with securities companies in Makassar. Data were obtained through interviews and distributing questionnaires to determine the effect of financial literacy through investment risk tolerance on decision making. The results showed that the financial literacy factor through risk tolerance had no effect on financial decisions.

Kajian Literatur: Faktor Yang Berpengaruh Terhadap Keputusan Investasi Mahasiswa

The increasing investment activities in Indonesia have encouraged most students to start their involvement in the world of investment. Students make investments with the aim of gaining profits in the present and future. Of course, students need to make investment decisions carefully and pay attention to the factors that influence investment decisions. The purpose of this paper is to identify the factors that influence students' decision making in investing. This research uses the literature review method. In this literature review process, the author analyzes a number of journal articles that discuss the factors that influence students' investment decisions. Relevant journal articles were selected after searching for research sources through Google Scholar. The reference sources used are accredited national journals. From the results of the literature review analysis of several related journal articles, it can be concluded that student investment decisions are influenced by several factors. Factors that support students in making investment decisions are financial literacy, demographic factors, risk tolerance, risk perception, investment knowledge, overconfidence, and herding.

Does financial risk tolerance change over time?

Financial planners work in an environment that requires the documentation of a client’s financial attitudes and preferences. Financial risk tolerance is one such attitudinal construct that is generally required by regulators to be evaluated. While there are numerous commercial and academic products used to assess client risk attitudes, questions have been raised over the past several decades regarding the stability of scores from risk-tolerance tools. Specifically, financial planners, as well as regulators, require evidence documenting to what extent risk tolerance changes over time, and if changes do occur, the variables associated with variability. The purpose of this study was to address these needs. Based on a model that included macroeconomic indicators, biopsychosocial and environmental factors, and measures of social support, it was determined that risk-tolerance attitudes remain generally stable over time. However, there are groups of test takers that exhibit significant shifts in risk tolerance. This article describes some of the variables associated with these score changes, as well as providing financial planning professionals with guidance on how to identify clients who may be prone to shifting their tolerance for financial risk.

Bridging the adoption gap for cryptocurrencies: understanding the affordances that impact approach–avoidance behavior for potential users and continuation usage for actual users

PurposeWith the rise of cryptocurrency and its influence on the financial industry, this paper aims to explore cryptocurrency affordances that lead to approach–avoidance behavioral intentions for non-users (potential) and the intention to continue use for users (actual), drawing upon affordance theory and chasm theory.Design/methodology/approachThe authors collected data from 480 potential and actual users in Germany and used maximum likelihood structural equation modeling (ML-SEM) to analyze it. In particular, the data consisted of 301 cryptocurrency users in Germany\ the authors used ML-SEM to test the post-adoption model. Additionally, logistic regression was utilized to determine the dominant actual usage method (store of value or medium of exchange) for various cryptocurrency coins.FindingsAccording to the study's results, the perceived value benefits have a positive impact on the behavioral intention of potential users to adopt cryptocurrency, and they influence the intention of actual users to continue using it. However, both perceived volatility and financial risk tolerance are the most crucial factors hindering cryptocurrency adoption, whether in the pre-adoption or the post-adoption stage.Originality/valueThis is the first study to reveal cryptocurrency affordances and examine their effect on behavioral intentions toward cryptocurrency adoption based on the differences between non-users (potential) and users (actual). Furthermore, the authors explore how cryptocurrency holders perceive and invest in different coins (e.g. NFTs), which sheds light on factors such as financial risk tolerance that affect their decision making.