Risk Tolerance Level Of Investors Research Articles

PENGARUH LITERASI KEUANGAN DAN RISK TOLERANCE TERHADAP KEPUTUSAN INVESTASI

Investment decision is a person's decision to allocate funds to a certain asset with the aim of obtaining profits in the future. This research aims to examine the influence of financial literacy and risk tolerance on investment decisions. The population in this research are investors in South Sumatra. The sampling technique used is Probability Sampling, namely the slovin formula so that in this study the sample used was 400 respondents. This research was conducted using a quantitative method, the data used was by distributing questionnaires to respondents through online or offline. This research variable consists of X1 financial literacy, X2 risk tolerance, and Y investment decisions. This study uses 2 hypotheses. The data analysis technique uses Structural Equation Modeling (SEM) with the use of SmartPLS software.The results of this research show that financial literacy has a significant effect on investment decisions. Risk tolerance also has a significant effect on financial behavior. Apart from that, financial behavior is able to mediate the relationship between risk tolerance and investment decisions. The better the financial literacy an investor has, the better the quality of the investment decisions they will take. And the higher the risk tolerance level of investors, the higher the preference level of investment decisions that investors are willing to take, so that the higher the level of risk that will be borne.

THE FACE AND CONTENT VALIDITY OF AN INSTRUMENT FOR MEASURING FINANCIAL RISK TOLERANCE

Accurate evaluation of investment risk tolerance is critical in an investment decision-making process because a mismatch between the risk an investor could tolerate and the risk-return expectations could lead to frustration towards the actual financial gains or financial losses. This study aims to develop a valid instrument (or scale) for self-directed Malaysian investors to measure financial risk tolerance based on four main constructs, i.e., risk attitude, risk propensity, risk capacity, and financial literacy. An initial 36-item instrument was developed based on the assessment framework from Cordell (2001), which subsequently was examined by four lay experts for face validity. Consequently, according to Andrian et al. (2018), seven professional experts, comprising theoretical, industry practitioner, and psychometric experts, were involved in reviewing the relevancy of the content of each item towards measuring financial or investment risk tolerance level. As a result, the instrument is deemed to have a good face value, with 94.4% of the items rated highly at 4 or 3 (out of the maximum rating of 4) by lay experts. Out of the 36 items, only 5.56% are rated 1 or 2, and 16.7% of the items require revision in terms of their face value and clarity. The content validity exercise resulted in high scores of more than 0.83 cut scores based on Lynn (1986) for the scale content validity index (S-CVI), with nine items recorded as item content validity index (I-CVI) below 0.83. The S-CVI improved further to 0.90 after the removal of items with low I-CVI. The findings have also successfully produced a valid instrument that can measure the financial risk tolerance level of investors in Malaysia.

“Impact of financial literacy and Risk Tolerance on Investment Decision”

Researcher has followed a widespread approach for explain the relationship between financial literacy, risk tolerance and investment decision. Recently there has been increasing interest in studying the behaviors of investors and the factors which affecting the investment decisions of investors due to a synchronized approached followed by a large number of investors. A Study has been shown that a large number of investors look after the safety of their money not higher return.[1] Investment decision is a crucial decision which is influenced by various factors as financial literacy, income level, financial soundness and various other demographic and sociological factors. The choice of investment alternative of is broadly depends upon the risk tolerance level of investors.[2] On the basis of certain conclusion, cover from precious research, the researcher in this study defines the relationship between financial literacy, risk tolerance and financial decision making of investors through exploratory research tools. For explaining this relationship researcher gives a mediation model. By using this mediation model a direct relationship between Financial Literacy and Risk Tolerance and between Financial Literacy and Investment Decision via Risk Tolerance, can be explored.

Establishing AN Association between Risk Tolerance and Behavioral Biases among Indian Investors

Behavioral Finance Literature Has Shown A Mushroom Growth In The Recent Years. Literature Shed Specific Light On How The Concept Evolved And Later Developed To Various Stages Which Helped To Understand Various Market Anomalies And The Psychology Of Individuals Through Behavioral Biases. Behavioral Finance Tries To Explain The Logic Behind Applying Of Heuristics Or Shortcuts By Investors To Take Investment Decisions Which Still Need To Be Extensively Studied. The Study Here Attempts For Identify Presence Of Different Biases In Individual Decision Making And Their Association With The Risk Tolerance Capacity. The Results Indicate That Heuristic Biases (I.E. Representativeness Bias, Overconfidence Bias And Gamblers Fallacy Bias) Are Linked To Moderate To High Risk Tolerant Investors. While Herd Bias And Prospect Biases (Loss Aversion Bias And Mental Accounting Bias) Are Found To Be Linked With Low To Moderate Risk Tolerance Levels Of Investors. Heuristics Are Positively Correlated With Risk Tolerance However; Prospect And Herd Are Found To Be Negatively Correlated With Risk Tolerance.