Risk tolerance and household wealth--Evidence from Chinese households

Fang, Ming; Li, Haiyang; Wang, Qin

doi:10.1016/j.econmod.2020.02.029

Cited by 29 publications

(15 citation statements)

References 39 publications

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“…Cultural differences may also affect risk tolerance as noted by Pyles et al (2016), but its actual translation into investment decision is yet to be confirmed. Several other factors identified by Fang et al (2020), such as wealth accumulation and prior experience with famine can be included as it may contribute to understanding better risk tolerance and risk-taking behaviors.…”

Section: Discussionmentioning

confidence: 99%

Financial Risk Tolerance: The Case of Older Chinese in Klang Valley, Malaysia 2020

Chong

Heng²,

Lim³

et al. 2021

IJFR

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Ageing demographic profiles pose challenges to the nation as policymakers are concerned about the health, public pension and the financial management of the society. In Malaysia, retirees are mostly dependent on savings from the Employees Provident Fund (EPF), a government agency that manages savings and retirement plans for private-sector employees and non-pensionable public servants. Many Malaysians aged past the targeted retirement age of 60 years old chose to remain in the workforce, mainly due to insufficient retirement funds or has depleted their retirement funds in a short period. To ensure sufficient funds to attain an ideal retirement life, Malaysians resort to invest or seek business opportunities. Thus, this paper studies the impact of demographic characteristics (sex, age, and educational level) and finance characteristics (financial knowledge and financial satisfaction) on the risk tolerance among older Malaysian Chinese in the year 2020. The results of this study showed that the older Malaysian Chinese risk tolerance is highly influenced by sex, age, education level, financial knowledge and financial satisfaction.

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Section: Discussionmentioning

confidence: 99%

Financial Risk Tolerance: The Case of Older Chinese in Klang Valley, Malaysia 2020

Chong

Heng²,

Lim³

et al. 2021

IJFR

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“…In investigating the impact of risk tolerance, Hoffmann et al ( 2015 ) report that a higher degree of risk tolerance and upward revisions lead to excessive trading, buy–sell ratios, usage of limit order, and riskier portfolios. The causes of risk tolerance are demonstrated by Fang et al ( 2021 ), where a higher accumulation of wealth and high-income level affect risk tolerance in China. Going one step further, Bapat ( 2020 ) found the moderating effect of financial risk tolerance.…”

Section: Research On Risk Tolerancementioning

confidence: 98%

Prior perceived losses and investment objectives after stock market crisis: a moderated-mediation model of risk tolerance and loss aversion

Khan

2022

SN Bus Econ

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This study explores whether prior perceived losses affect investment objectives via loss aversion as a mediator and whether the indirect effect is moderated by risk tolerance in a moderated-mediation model. Using retail investors who witnessed a market crash in Bangladesh and experienced losses, the model is tested by employing regression analyses and conditional process. The analyses reveal that prior perceived losses indirectly affect investment objectives (earning a higher expected return and building a financial reserve for future expenses) via mediation of loss aversion. Moderated-mediation model shows that for high-risk-tolerant investors, prior perceived losses indirectly affect investors to invest more for achieving a higher expected return objective and less to achieving building a financial reserve for future expenses, via a low level of loss aversion. These suggest that risk-tolerant investors continue to invest to earn a higher expected return even though they experienced prior losses and are loss-averse. Supplementary Information The online version contains supplementary material available at 10.1007/s43546-022-00259-6.

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“…Income, as a measure of financial risk capacity, is generally thought to be negatively associated with financial aversion (Grable, 2000; Grable and Joo, 2004; Fang et al , 2021; Pinjisakikool, 2017; Wong, 2011). Similarly, attained education is most often reported in the literature to be negatively associated with financial risk aversion (Grable, 2000; Grable and Joo, 2004; Hallahan et al , 2004; Larkin et al , 2013; Pinjisakikool, 2017; Wong, 2011).…”

Section: Review Of Literaturementioning

confidence: 99%

The role of disappointment aversion and expectation proclivity in describing financial risk aversion among financial decision-makers

Grable

Kwak

2021

IJBM

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PurposeUsing data obtained from 525 individuals who were surveyed during early spring 2020, this study addressed three aims: (1) to ascertain the degree to which disappointment aversion and expectation proclivity are related; (2) to identify who is most likely to exhibit patterns of disappointment aversion; and (3) to determine to what extent the combination of disappointment aversion and expectation proclivity is associated with financial risk aversion.Design/methodology/approachSeveral analytic methods were used in this study. Descriptive statistics were calculated for each of the measures examined in this study. Correlation, analysis of variance (ANOVA) and regression techniques were used to estimate associations between and among the variables of interest in this study.FindingsA negative relationship between disappointment aversion and expectation proclivity was noted, which is counter to conventional thinking. It is traditionally thought that those who establish high expectations will experience the greatest disappointment when choice outcomes fall below expectations. In this study, it was determined that when a financial decision-maker consistently establishes high outcome expectations and results fall below expectations, the financial decision-maker feels less disappointment. More precisely, those who consistently establish high expectations tend to be more disappointment tolerant than others.Research limitations/implicationsThis paper provides evidence that categories of disappointment aversion and expectation proclivity are associated with financial risk aversion and certain demographic characteristics.Practical implicationsThis paper adds support for assertions made in the International Journal of Bank Marketing (IJBM) that it is important for financial service professionals and bankers to manage customer expectations to reduce disappointment with products and services. This paper shows that combinations of disappointment aversion and expectation proclivity are related to the financial risk aversion of customers.Social implicationsFindings from this paper indicate that a commonly used heuristic that decision-makers should reduce expectations to avoid disappointment may not be accurate or particularly useful in the context of financial decision-making.Originality/valueFindings from this study add to the existing body of literature by showing that aversion to disappointment and the establishment of expectations, while distinct concepts, are interrelated.

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Risk tolerance and household wealth--Evidence from Chinese households

Cited by 29 publications

References 39 publications

Financial Risk Tolerance: The Case of Older Chinese in Klang Valley, Malaysia 2020

Financial Risk Tolerance: The Case of Older Chinese in Klang Valley, Malaysia 2020

Prior perceived losses and investment objectives after stock market crisis: a moderated-mediation model of risk tolerance and loss aversion

The role of disappointment aversion and expectation proclivity in describing financial risk aversion among financial decision-makers

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