An Empirical Study on Financial Risk Tolerance of Investors in India

The IUP Journal of Financial Risk Management, Vol. XIV, No. 3, September 2017, pp. 40-58

Posted: 8 Aug 2018

See all articles by R Mohan

R Mohan

National Institute of Technology Warangal

Smriti Singh

National Institute of Technology Warangal

Date Written: 2017

Abstract

Financial personality assessment aspect is nothing but the behavioral map of the client and their attitude towards wealth creation. The risk profiling or assessment of risk tolerance aims at giving feedback to the financial advisors about the nature of the client with respect to their financial risktaking capacity. Financial risk tolerance is the degree of volatility in returns that an investor is willing to bear for his investment. Risk tolerance is volatile utility whose value cannot be measured quantitatively, but whose representation is of great importance to financial advisors to identify the risk-taking ability of their clients by analyzing it and to help choose proper financial products. This study is designed to analyze the risk profile of investors based on their risk-taking abilities. The findings of the study indicate that financial risk tolerance has relation with the education level, age, marital status, number of dependants, tax benefit associated with financial product and loan structure, but is not related to gender, income level and insurance coverage of the client. The paper identifies the need for increased effort towards investor education with regard to financial system to increase the level of risk tolerance.

Suggested Citation

Mohan, R and Singh, Smriti, An Empirical Study on Financial Risk Tolerance of Investors in India (2017). The IUP Journal of Financial Risk Management, Vol. XIV, No. 3, September 2017, pp. 40-58, Available at SSRN: https://ssrn.com/abstract=3218113

R Mohan (Contact Author)

National Institute of Technology Warangal ( email )

Kazipet warangal
Telangana state
Warangal, Hanamkonda 506004
India

Smriti Singh

National Institute of Technology Warangal ( email )

Kazipet warangal
Telangana state
Warangal, Hanamkonda 506004
India

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