Culture in Risk, Regret, Maximization, Social Trust, and Life Satisfaction

Abstract

Cultural literacy is analogous to financial literacy and is almost as important. Cultural literacy matters to advisors as they design fitting financial plans because clients carry within them the cultures of their countries of origin long after they have settled in their countries of residence. Culture is associated with risk tolerance, propensities for regret, maximization, social trust, life satisfaction, income, family and public safety nets, and more. Surveys of 4,690 people in twenty-three countries show that risk tolerance is high in countries where income per capita is low, perhaps because aspirations for higher income are more prevalent in countries where income is low. And risk tolerance is high in countries where social trust is high. Propensity for regret is high in individualistic countries, where people cannot rely on family and friends to mitigate regret by diffusing responsibility for choices and in countries where intellectual autonomy is high, increasing personal responsibility for choices.

Keywords: Risk tolerance, Regret, Trust, Maximization, Portfolio Theory, Behavioral Finance, Financial Advisors

JEL Classification: D81, G00, G10, G11