An Analytical Study on Association of Demographic Factors With Risk Tolerance Level of Investors of Nagpur

Abstract

Rational investor is risk averse, but the willingness to accept unfavourable changes in the returns of an asset differs from person to person. This willingness which is known as risk tolerance is influenced by many factors. The main purpose of this study is to understand and analyse the relation between demographic variables and risk taking capacity of individuals. The sample size for the study was 521 retail investors of Nagpur City in India. The statistical tools like Kruskal Wallis Test, Mc.Nemar Test and Chi-square were used to test the hypothesis.

The data analysis indicated that demographic parameters like gender, education, monthly income, occupation and % of income invested have an association with the risk tolerance level. It was also observed that there is a difference between perception of investors regarding investment of earned income and investment of inherited money. Risk tolerance was found to be significantly related with level of education and income but not with age. Men were found to be more risk tolerant than women and similarly type of profession also had a significant relationship with risk tolerance of the investors.

Keywords: Risk tolerance, demographic factors, behavioral finance

JEL Classification: D91, G02