The Influence of Political Orientation on Financial Risk Taking

American Journal of Business, 2010, Vol. 25, No. 1, 35-43

23 Pages Posted: 23 Feb 2013

See all articles by Jeremy Paul Moore

Jeremy Paul Moore

Central Michigan University

James Felton

Central Michigan University - Department of Finance and Law

Colbrin Wright

Brigham Young University

Date Written: July 1, 2009

Abstract

We analyze the correlation between the political orientation of investors and their financial risk tolerance. Assessing financial risk tolerance is a very important aspect to developing an appropriate long-term investing strategy. Our study is based on a sample of 129 undergraduates at Central Michigan University during one academic year. We employ a two-axis political compass to determine the political orientation of our study participants. We determine their financial risk tolerance by analyzing their portfolios and trading behavior in a simulated investment game in a semester-long course. We report two main findings: (1) financial risk tolerance is highest for those with more conservative economic political views and (2) financial risk tolerance is highest for those with more centrist social political views. We believe these results can help investment advisors and individual investors to better assess individual risk tolerance through the use of the two-axis political utilized in our study.

Keywords: economic orientation, political orientation, social orientation, risk tolerance, RiskGrade, Stock-Trak, Political Compass, liberal, conservative

JEL Classification: G11, G12, G14

Suggested Citation

Moore, Jeremy Paul and Felton, James and Wright, Colbrin, The Influence of Political Orientation on Financial Risk Taking (July 1, 2009). American Journal of Business, 2010, Vol. 25, No. 1, 35-43. Available at SSRN: https://ssrn.com/abstract=2222678

Jeremy Paul Moore

Central Michigan University ( email )

Mt. Pleasant, MI 48858
United States

James Felton

Central Michigan University - Department of Finance and Law ( email )

Mount Pleasant, MI 48859
989-774-3269 (Phone)
989-774-6456 (Fax)

Colbrin Wright (Contact Author)

Brigham Young University ( email )

United States
(801) 422 1224 (Phone)

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