The effect of age and gender on financial risk tolerance of South African investors (original) (raw)

Subjective Risk Tolerance of South African Investors

Journal of Economics and Behavioral Studies, 2018

In general, the amount of risk an individual is willing to tolerate can be influenced by demographic factors. However, needs for research arise as to whether demographic factors influence the amount of risk investors in South Africa are willing to tolerate. The survey was conducted in 2017 and all South African investors were included in the sample frame. For this study, a sample of 800 was collected and used. Multinomial regression was used to indicate whether there were more than two factors that can influence the four risk tolerance levels of South African investors. The study suggested that gender is a determining factor in the risk tolerance of individuals. African investors were more likely to take the substantial financial risk. Age was also a determining factor of risk tolerance which follows the assumptions of the investor lifecycle where younger investors are more risk tolerant. The study furthermore found that higher annual income attracts more risk-taking while lower-income attracts more risk averseness in individuals. It was lastly observed that married individuals and those that are no longer married will be more likely to be risk-averse. This study makes a significant contribution in profiling investors risk tolerance according to their demographic factors whereby financial institutions can offer more tailored investment options.

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.

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 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.

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.

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.

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.

Financial Risk Tolerance Based on Demographic Factors of Women Investors: Indian Perspective

International Journal of Financial Management, 2020

The paper aims to examine the phenomenon of risk-taking ability in response to the demographic factors of women investors in Indian stock market and analyzes the impact of demographics of women on their risk-tolerance level. Women' risk-taking ability is very vital aspect to recognize their most favorable investment portfolio. A well-structured questionnaire was administered personally to 400 Indian women investors. The results stated that women investors in Haryana, India, have low-risk appetite. They cannot afford to take high risk. So, women prefer risk-free investment and avoid losing their money. Women's demographic distinctiveness plays a crucial role in identifying their risk-tolerance levels. In this regard, age, marital status, education, income, experience and occupation were found to have a major impact in determining the risk appetite of women. It is hoped that the findings will assist financial advisors, investment managers and financial consultant to understand and discover the solution to those demographic factors, which cause variations in risk-tolerance level. This study corroborates the importance of financial literacy to make women more aware and technically sound with dimensions of investment. Further, it will help in making ideal investment portfolio by accommodating the need of investors effectively. This study will contribute to the understanding investment behavior of investors. This empirical research represents how demographic variables influence risk-taking ability of women and provides precious understanding that how women investors of Haryana make their financial decision.

Role of Gender in Predicting Determinant of Financial Risk Tolerance

Sustainability

This research was conducted to determine whether the determinants of financial risk tolerance varied by gender or whether the same factors influenced the risk-taking capacities of both genders. This study utilised personality types (Type-A and Type-B), financial literacy, and six demographic parameters, including marital status, age, education, income, occupation, and the number of dependents, as independent variables, and gender as a dividing variable. In order to conduct this study, information was gathered from 671 investors. The financial risk tolerance of male investors was determined by six out of eight independent factors (personality type, financial literacy, marital status, income, occupation, and the number of dependents). However, just four factors (personality type, financial literacy, marital status, and income) have a substantial impact on the financial risk tolerance of female investors.