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An Empirical Study of Financial Literacy versus Risk Tolerance Among Higher Education Students

Author

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  • Huzdik, Katalin
  • Béres, Dániel
  • Németh, Erzsébet

Abstract

The survey conducted in 2012–2013 by the State Audit Office of Hungary and its non-governmental partners examined the financial literacy, financial knowledge and risk appetite among higher education students (n=1,743), as well as the factors influencing the same. Our results show that starting a business only appears among the students’ plans and goals to a lesser extent, and some three-quarters of the students are risk averse. It is surprising, at the same time, that their risk appetite does not depend on either the level of their knowledge of finance and economics or on their perception of their own financial knowledge and competence. Excessive risk aversion may prevent the leveraging of financial opportunities and may act as an obstacle to the development of the national economy if it becomes a mass phenomenon. This creates a need for young people with realistic self-perceptions, appropriate attitudes towards risks, and the capability of enterprise.

Suggested Citation

  • Huzdik, Katalin & Béres, Dániel & Németh, Erzsébet, 2014. "An Empirical Study of Financial Literacy versus Risk Tolerance Among Higher Education Students," Public Finance Quarterly, Corvinus University of Budapest, vol. 59(4), pages 444-456.
    • Handle: RePEc:pfq:journl:v:59:y:2014:i:4:p:444-456
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    File URL: https://unipub.lib.uni-corvinus.hu/8859/
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    Citations

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    Cited by:

    1. Courtney Droms Hatch & Kurt Carlson & William G. Droms, 2018. "Effects of market returns and market volatility on investor risk tolerance," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 23(2), pages 77-90, June.
    2. Zaheer Ahmed & Umara Noreen & Suresh A.L. Ramakrishnan & Dewi Fariha Binti Abdullah, 2021. "What explains the investment decision-making behaviour? The role of financial literacy and financial risk tolerance," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 11(1), pages 1-19.

    More about this item

    Keywords

    young adults; financial behaviour; financial attitude; financial literacy; risk aversion; self-perception;
    All these keywords.

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
    • A23 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Graduate
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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