Abstract
The purpose of this research was to extend the investigative line of inquiry, as initiated by Carducci and Wong (1998), regarding risk taking in everyday money matters by examining demographic, socioeconomic, and attitudinal characteristics that may be used either individually or in combination as determinants of financial risk tolerance. Discriminant analysis results indicated that risk tolerance was associated with being male, older, married, professionally employed with higher incomes, more education, more financial knowledge, and increased economic expectations. Findings suggest that the achievement of financial success can be explained, at least in part, by a combination of someone's personality characteristics and socioeconomic background.
Similar content being viewed by others
REFERENCES
Bajtelsmit, V. L., & Bernasek, A. (1996). Why do women invest differently than men? Financial Counseling and Planning, 7, 1–10.
Baker, H. K., & Haslem, J. A. (1974). The impact of investor socioeconomic characteristics on risk and return preferences. Journal of Business Research, 2, 469–476.
Bakshi, G. S., & Chen, Z. (1994). Baby boom, population aging, and capital markets. Journal of Business, 67, 165–202.
Blume, M. (1978). The changing role of the individual investor. New York: John Wiley & Sons, Inc.
Botwinick, J. (1984). Aging and behavior. New York: Springer Publishing Company.
Brown, D. P. (1990). Age clienteles induced by liquidity constraints. International Economic Review, 31, 891–912.
Carducci, B. J., & Wong, A. S. (1998). Type A and risk taking in everyday money matters. Journal of Business and Psychology, 12, 355–359.
Cicchetti, C. J., & Dubin, J. A. (1994). A microeconometric analysis of risk aversion and the decision to self-insure. Journal of Political Economy, 102, 169–186.
Cohn, R. A., Lewellen, W. G., Lease, R. C., & Schlarbaum, G. G. (1975). Individual investor risk aversion and investment portfolio composition. Journal of Finance, 30, 605–620.
Cutler, N. E. (1995, January). Three myths of risk-tolerance: What clients are not telling you. Journal of the American Society of CLU & ChFC, 49, 33–37.
Dahlback, O. (1991). Saving and risk taking. Journal of Economic Psychology, 12, 479–500.
DeVaney, S. A., & Su, Y. (1997). Gender differences in retirement planning knowledge. Personal Finances and Worker Productivity, 1, 160–171.
Grable, J. E., & Joo, S. H. (1997). Determinants of risk preference: Implications for family and consumer science professionals. Family Economics and Resource Management Biennial, 2, 19–24.
Grable, J. E., & Lytton, R. H. (1997). Determinants of retirement savings plan participation: A discriminant analysis. Personal Finances and Worker Productivity, 1(1), 184–189.
Grey, R. J., & Gordon, G. G. (1978, November). Risk-taking managers: Who get the top jobs? Management Review, 67, 8–13.
Haliassos, M., & Bertaut, C. C. (1995). Why do so few hold stocks? The Economic Journal, 105, 1110–1129.
Hawley, C. B., & Fujii, E. T. (1993–1994). An empirical analysis of preferences for financial risk: Further evidence on the Friedman-Savage model. Journal of Post Keynesian Economics, 16, 197–204.
Lazzarone, B. G. (1996). The economic well-being or rural Nevada elders. Proceedings of the 1996 Conference of the Western Region Home Management Family Economics Educators, 67–74.
Lee, H. K., & Hanna, S. (1995). Empirical patterns of risk-tolerance. Proceedings of the Academy of Financial Services.
Masters, R. (1989, July). Study examines investors' risk-taking propensities. The Journal of Financial Planning, 2, 151–155.
McInish, T. H. (1982). Individual investors and risk-taking. Journal of Economic Psychology, 2, 125–136.
Meyer, H. H., Walker, W. B., & Litwin, G. H. (1961). Motive patterns and risk preferences associated with entrepreneurship. Journal of Abnormal and Social Psychology, 63, 570–574.
Morin, R-A., & Suarez, F. (1983). Risk aversion revisited. The Journal of Finance, 38, 1201–1216.
Palsson, A-M. (1996). Does the degree of relative risk aversion vary with household characteristics? Journal of Economic Psychology, 17, 771–787.
Quattlebaum, O. M. (1988). Loss aversion: The key to determining individual risk. The Journal of Financial Planning, 1(1), 66–68.
Riley, W. B., & Chow, K. V. (1992). Asset allocation and individual risk aversion. Financial Analysts Journal, 48, 32–37.
Roszkowski, M. J., Snelbecker, G. E., & Leimberg, S. R. (1993). Risk-tolerance and risk aversion. In S. R. Leimberg, M. J. Satinsky, R. T. LeClair, & R. J. Doyle, Jr. (eds.), The tools and techniques of financial planning (4th ed., pp. 213–225). Cincinnati, OH: National Underwriter.
Rubin, P. H., & Paul, C. W. (1979). An evolutionary model of tastes for risk. Economic Inquiry, 17, 585–596.
Schooley, D. K., & Worden, D. D. (1996). Risk aversion measures: Comparing attitudes and asset allocation. Financial Services Review, 5, 87–99.
Shaw, K. L. (1996). An empirical analysis of risk aversion and income growth. Journal of Labor Economics, 14, 626–653.
Slovic, P. (1966). Risk-taking in children: Age and sex differences. Child Development, 37, 169–176.
Snelbecker, G. E., Roszkowski, M. J., & Cutler, N. E. (1990). Investors' risk-tolerance and return aspirations, and financial advisors's interpretations: A conceptual model and exploratory data. The Journal of Behavioral Economics, 19, 377–393.
Strube, M. J. (Eds.) Type A behavior. Newbury Park, CA: Sage.
Sung, J., & Hanna, S. (1996). Factors related to risk-tolerance. Financial Counseling and Planning, 7, 11–20.
Thoresen, C. E., & Low, K. G. (1990). Women and the Type A Behavior Pattern: Review and commentary. Journal of Social Behavior and Personality, 5, 117–133.
Zhong, L. X., & Xiao, J. J. (1995). Determinants of family bond and stock holdings. Financial Counseling and Planning, 6, 107–114.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Grable, J.E. Financial Risk Tolerance and Additional Factors That Affect Risk Taking in Everyday Money Matters. Journal of Business and Psychology 14, 625–630 (2000). https://doi.org/10.1023/A:1022994314982
Issue Date:
DOI: https://doi.org/10.1023/A:1022994314982