An exploratory investigation of the relation between risk tolerance scores and demographic characteristics

Terrence Hallahan*, Robert Faff, Michael McKenzie

*Corresponding author for this work

Research output: Contribution to journalArticle

44 Citations (Scopus)

Abstract

This study examines the relationship between a psychometrically derived measure of subjective financial risk tolerance and a range of demographic characteristics that are widely used as a basis for heuristically derived estimates of investors' attitudes towards financial risk. The validity of widely used demographics such as gender, age, income and wealth as determinants of risk tolerance is supported, although the relationships found are not as simple as implied by the demographic heuristics. In particular, risk tolerance exhibits concavity in respect to income across all age groups and irrespective of gender. However, education, marital status and dependents, which have been found to be significant in previous studies, were not found to be significant determinants of an individual's attitude towards risk in this study.

Original languageEnglish
Pages (from-to)483-502
Number of pages20
JournalJournal of Multinational Financial Management
Volume13
Issue number4-5
DOIs
Publication statusPublished - Dec 2003

Keywords

  • Risk assessment heuristics
  • Risk tolerance

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