Determinants of Risk Tolerance in the Baby Boomer Cohort
Journal of Business & Economics Research, Vol. 8, No. 5, 2010
8 Pages Posted: 12 Mar 2010 Last revised: 23 Mar 2010
Date Written: March 10, 2010
Using data from 26,759 respondents, this study examined the differences in financial risk tolerance among leading baby boomers and trailing baby boomers. The study also investigated differences between these two sub-cohorts in perceived risk tolerance and measured risk tolerance as determined by the FinaMetrica Risk Profiling System. The results of this study found that leading boomers were less risk tolerant than trailing boomers. Variables with a positive association with risk tolerance for both groups include higher educational attainment, income, net worth, and gender with men having higher risk tolerance than women. There was dissimilarity between married for leading boomer and trailing boomer. Being married was negatively associated with risk tolerance for leading boomers and positive for trailing boomers. It was also found that leading boomers, those with less educational attainment, lower income earners and those with a greater number of financial dependents tend to underestimate their risk tolerance.
Keywords: Financial Risk Tolerance, Perceived Risk Tolerance, Baby Boomers
JEL Classification: D03, D14
Suggested Citation: Suggested Citation