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The influence of the level of education on investors risk tolerance level

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  • Zandri Koekemoer

    (North West University)

Abstract

Increased attention is being given to the influencethat demographic factors have on financial risk tolerance. Financial risk tolerance is the overall amount of uncertainty an investor is willing to take with regard to his/herinvestment decisions. The aim of this article was to investigate whether an investor?s level of education plays a role in the level of financial risk that they are willing to tolerate.Data for this article was purposefully collected using a quantitative questionnaire thatwas electronically distributed to 600 investors within the South African market. Previous research suggests thata positive relationship exists between the level of education and risk tolerance. In other words, an investor with a higher level of education will be willing to tolerate more financial risk due to being able to take more calculated financial risks. The results of this study indicated similar findings to previous research wherean individual with a postgraduate degree was more likely to be high risk tolerant compared to an individual with a lower level of education. Individuals who had some level of schooling were more likely to be risk adverse.

Suggested Citation

  • Zandri Koekemoer, 2019. "The influence of the level of education on investors risk tolerance level," Proceedings of Economics and Finance Conferences 9511449, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iefpro:9511449
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    References listed on IDEAS

    as
    1. Hallahan, Terrence & Faff, Robert & McKenzie, Michael, 2003. "An exploratory investigation of the relation between risk tolerance scores and demographic characteristics," Journal of Multinational Financial Management, Elsevier, vol. 13(4-5), pages 483-502, December.
    2. McInish, Thomas H., 1982. "Individual investors and risk-taking," Journal of Economic Psychology, Elsevier, vol. 2(2), pages 125-136, June.
    3. Fisher, Patti J. & Yao, Rui, 2017. "Gender differences in financial risk tolerance," Journal of Economic Psychology, Elsevier, vol. 61(C), pages 191-202.
    4. Baker, H. Kent & Haslem, John A., 1974. "The impact of investor socioeconomic characteristics on risk and return preferences," Journal of Business Research, Elsevier, vol. 2(4), pages 469-476, October.
    5. Brian Lucey & Charles Larkin, 2012. "Risk Tolerance and Demographic Characteristics: Preliminary Irish Evidence," The Institute for International Integration Studies Discussion Paper Series iiisdp406, IIIS.
    6. Haliassos, Michael & Bertaut, Carol C, 1995. "Why Do So Few Hold Stocks?," Economic Journal, Royal Economic Society, vol. 105(432), pages 1110-1129, September.
    7. Parisa Hosseini Ardehali & Joseph C. Paradi & Mette Asmild, 2005. "Assessing Financial Risk Tolerance Of Portfolio Investors Using Data Envelopment Analysis," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 4(03), pages 491-519.
    8. Ryan Gibson & David Michayluk & Gerhard Van de Venter, 2013. "Financial risk tolerance: An analysis of unexplored factors," Published Paper Series 2013-1, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    9. Robert Faff & Daniel Mulino & Daniel Chai, 2008. "On The Linkage Between Financial Risk Tolerance And Risk Aversion," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 31(1), pages 1-23, March.
    10. Van de Venter, Gerhard & Michayluk, David & Davey, Geoff, 2012. "A longitudinal study of financial risk tolerance," Journal of Economic Psychology, Elsevier, vol. 33(4), pages 794-800.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Risk tolerance; education level; financial decisions; demographics;
    All these keywords.

    JEL classification:

    • A23 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Graduate
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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