Subjective Risk Tolerance of South African Investors (original) (raw)
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The effect of age and gender on financial risk tolerance of South African investors
Investment Management and Financial Innovations
Financial risk tolerance refers to the amount of risk a person is willing to take when making financial decisions. Previous researchers have found that demographic factors when used as independent variables to have an effect on the risk tolerance behavior of investors. Within this study, emphasis was given to gender and age within a sample of South African investors. Not much research on risk tolerance and demographics has been done in South Africa. Hence, an opportunity for further research within this field emerged. This study aimed to contribute towards the accurate risk profiling of South African investors based on their level of risk tolerance considering their gender and age. This study can be used as a future forecasting tool for investment companies to predict risk tolerance levels based on gender and age levels. Results from this study correspond to previous studies where male investors are more risk tolerant than female investors. A statistical difference was also found be...
Individual Investor Risk Tolerance from a Behavioural Finance Perspective in Gauteng, South Africa
International Journal of Economics and Financial Issues, 2021
The investment behaviour of individuals is unconsciously influenced by their thoughts, emotions, personal beliefs or past experiences to the degree that even individual investors with considerable knowledge may diverge from logic and reason. These influences, which can be classified as behavioural finance biases, may affect the manner in which risk is perceived and understood. This study aims to establish the relationship between the behavioural finance biases and the risk tolerance of individual investors within Gauteng, South Africa. This study also aims to identify the behavioural finance biases that drive individual investment decisions. Positive, statistically significant relationships were established between the behavioural finance biases and individual investor risk tolerance. Furthermore, the investment decisions of individual investors are driven to a rather great extent by the behavioural finance biases. The significance of these findings will contribute to facilitate the more practical and accurate profiling of individual investors' risk tolerance to ensure the successful implementation of investment strategies not only within South Africa, but also internationally.
Impact of Demographic Variables and Risk Tolerance on Investment Decisions: An Empirical Analysis
Microeconomics: Decision-Making under Risk & Uncertainty eJournal, 2016
This empirical study explores the investment pattern and financial decision making of individuals and their risk tolerance. The study has adopted financial risk tolerance scale proposed by Grable and Lytton to measure the different dimensions of financial risk. Kendall’s W test is used to ascertain the preferred source of investment of individuals. Chi-square test is used to determine the demographic variables and their relationship with investment pattern. The study reveals that gender has an impact on the investment pattern and decision making of respondents.
Impact of Risk Tolerance and Demographic Factors on Financial Investment Decision
International Journal of Financial Management, 2018
Risk tolerance is popularly used in the personal financial planning industry to understand an investor's attitude towards risk. In the twenty-first century, it is very important for the various investment firms, fund managers, financial planners to understand financial investment decisions of an investor for developing a strategy for the sale of their investment products in market. However, financial decisions of an individual not only depend on financial risk-tolerance level, but also upon different demographic factors. Thus, this study is undertaken to develop a model that helps in understanding impact of risk tolerance and demographic factors jointly on investment decision; especially, a decision related to level of investment. Also, investor may be having higher risk tolerance for the calculative investment but may be having lover risk tolerance in speculative investment. So, based on extensive literature support, this research has tried to propose a model for understanding the impact of investment risk tolerance, capital risk tolerance, speculative risk tolerance, and six important demographic variables jointly on investment decision. Thus, this study would be helpful to investment firms in understanding impact of risk tolerances and demographic variables jointly on level of investment of investors, which can be used for designing a strategy or investment product to offer to the investors with different levels of financial risk tolerance and different demographic profiles.
A structural equation model of financial risk tolerance in South Africa
Cogent Business & Management, 2020
Modelling investor behaviour in the South African context is important for investment companies to profile their clients. Various factors can influence the risk tolerance of investors. For the purpose of this research article, the emphasis was placed on demographics, life satisfaction and how risk-taking behaviour and perception in several life domains influences risk tolerance. An electronic questionnaire was distributed to over 4 000 investors throughout South Africa. The final sample size was 1 065. Age and gender were found to significantly influence investor risk tolerance. A negative relationship was found between age and risk tolerance, indicative that risk tolerance decreases with age. Life satisfaction did also significantly contribute to predicting investor risk tolerance. The development of this risk tolerance structural equation model is unique in its existence, as it is the first model to incorporate demographics, life satisfaction, risk-taking behaviour and perception, and risk tolerance level in the South African context. As a result, these findings will make a significant contribution to the way financial investment companies profile their clients.
Impact of Demographic Factors on Investment Risk Tolerance
The study aims to investigate the impact of demographic factors on investment risk tolerance. The demographic variables taken include age, gender, marital status, income, work experience, and education. The primary data has been collected through questionnaires by adopting a deductive approach. The sample size consists of 106 respondents using convenience sampling. SPSS is used for data analysis and person correlation, and linear regression is applied to analyze the relationship between the variables. It was identified that gender, income, and education are positively related to risk tolerance level, whereas age, marital status, and work experience are negatively related to risk tolerance. Gender is found to have a significant positive impact on risk tolerance level, whereas marital status has been found to have a negative and significant relationship with the risk tolerance level of individuals. These findings will be helpful for the investors to improve their investment decision-making skills. The further risk tolerance of investors may depend on the behavioral factors too.
Risk Tolerance, Demographics and Portfolio Performance
2017
The purpose of this study was to establish whether risk tolerance differs among investors based on their demographics (age, gender, education, and experience) and also to determine the relationship between risk tolerance and portfolio returns. A sample comprising of 279 investors who trade at the Nairobi Securities Exchange, Kenya was considered. Data was analyzed using ANOVA and regression analysis. The findings depicted that female investors, experienced investors, those with no academic qualifications and also older investors were more risk tolerant. As such, they held risky equity portfolios. Regression results indicated that risk is positively related with portfolio returns without the effect of demographics. However, when demographics moderate the relationship between risk and portfolio returns, the relationship becomes insignificant. The study concludes that age, gender, experience and education do not moderate in the relationship between risk and portfolio performance.
1997
This study was designed to determine whether the variables gender, age, marital status, occupation, self-employment, income, race, and education could be used individually or in combination to both differentiate among levels of investor risk tolerance and classify individuals into risk-tolerance categories. The Leimberg, Satinsky, LeClair, and Doyle (1993) financial management model was used as the theoretical basis for this study. The model explains the process of how investment managers effectively develop plans to allocate a client's scarce investment resources to meet financial objectives.
An analysis on the factors influencing risk tolerance level of individual investors
International Journal of Business Excellence, 2016
Risk tolerance had been gaining renewed research interest in recent years. Most of the investment decision-making models prevailing in the market use risk tolerance of investors as one major input to determine the investment plans. Owing to such prime importance, it proves to be essential to understand the factors which have significant influence on the risk level of individual investors. Though there are general heuristics that form the basis for most of the decisions made by investment managers, there had always been a word of caution noting on the level of reliability of such heuristics. This research study aims to determine if those general assumptions related to the influence of demographic variables on the risk tolerance level of individual investors are really true, with specific reference to Indian investors in the capital markets. It was concluded through the findings of the study that the general heuristics related to all demographic variables except gender, occupation and income level of investors are found to be false. It was further concluded that only gender and income level of investors were significantly influential in determining the risk tolerance level of individual investors.