Environmental and Biophysical Factors Associated with Financial Risk Tolerance

Abstract

The effects of environmental and biopsychosocial factors on financial risk tolerance is analyzed. The research is premised on Irwin’s (1993) risk-taking behavioral model. Findings from an OLS regression, using a sample of faculty and staff from two universities (N = 406), indicate that education, marital status, net worth, financial knowledge, and household income, as environmental factors, are related to financial risk tolerance. A significant biopsychosocial factor associated with financial risk tolerance is self-esteem. Findings from this study confirm Irwin’s recommendation that further research should take into account both environmental and biopsychosocial factors when attempting to explain financial risk-tolerance attitudes.

Keywords: Risk Tolerance, Financial Knowledge, Self-Esteem