An Empirical Investigation for Determining of the Relation Between Personal Financial Risk Tolerance and Demographic Characteristic

Abstract

Financial risk tolerance is one of the key elements that should be considered in making investment decisions for both investment managers and investors. According to its importance, understanding and measuring of financial risk tolerance is not a simple topic. Therefore measuring of financial risk tolerance and determining of the factors that affect financial risk perceptions of individual investors have been interest of research and discussion for long years. The purpose of this study was to investigate the relationship between financial risk tolerance and demographic characteristics such as age, gender, marital status, number of children, income and total net assets. In the analysis of data from nearly 1,100 university students, logistic regression analysis, and t-test and ANOVA analysis were used. Logistic regression analysis indicated that gender, department and working in a job were significant predictors of financial risk tolerance. Results of t-test and ANOVA analysis indicated that gender, department, working in a job, monthly personal income, monthly family’s total income and total net assets were significant in differentiating individuals into risk tolerance levels, although age, marital status and number of children had no significant effect on financial risk tolerance.

Keywords: Financial risk, risk aversion, financial risk tolerance, demographic characterictics