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Propensity toward financial risk tolerance: an analysis using behavioural factors

Author

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  • Mahfuzur Rahman

Abstract

Purpose - The purpose of this paper is to investigate the influence of six core behavioural factors on financial risk tolerance (FRT). The study also analyses the role of religiosity in the relationship between behavioural factors and FRT. Design/methodology/approach - Empirical data were collected using a survey questionnaire. A total of 1,679 questionnaires were distributed to six public universities in the Klang Valley. However, only 1,204 questionnaires were completed and used for analysis. This study employs structural equation modelling to validate and assess proposed research model. Findings - The results of the analysis demonstrated some new findings. The findings indicate that propensity for regret, propensity for trust, happiness in life, propensity to attribute success to luck and propensity for overconfidence have a significant influence on FRT while propensity for social interaction does not. The results also provide support for the moderating effects of religiosity in the proposed research model. Originality/value - The findings highlight the important role of behavioural determinants to assess individuals’ FRT. Understanding FRT is a complex process that goes beyond the exclusive use of behavioural factors. Thus, more research is clearly needed to resolve which additional factors can be used by financial advisors to increase the explained variance in FRT differences.

Suggested Citation

  • Mahfuzur Rahman, 2019. "Propensity toward financial risk tolerance: an analysis using behavioural factors," Review of Behavioral Finance, Emerald Group Publishing Limited, vol. 12(3), pages 259-281, August.
  • Handle: RePEc:eme:rbfpps:rbf-01-2019-0002
    DOI: 10.1108/RBF-01-2019-0002
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    Cited by:

    1. Pragati Hemrajani & Rajni & Rahul Dhiman, 2024. "Retail Investors’ Financial Risk Tolerance and Risk-taking Behaviour: The Role of Psychological Factors," FIIB Business Review, , vol. 13(1), pages 87-105, January.

    More about this item

    Keywords

    Religiosity; Financial risk tolerance; Behavioural factors; Propensity to indebtedness; G32; G110; M300;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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