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Cultural influences on risk tolerance and portfolio creation

Author

Listed:
  • Pyles, Mark K.
  • Li, Yongping
  • Wu, Shifang
  • Dolvin, Steven D.

Abstract

We extend existing research that examines the impact of culture on risk tolerance. Using surveys completed by Chinese and American students, we find, consistent with previous studies, that Chinese students perceive themselves as more risk tolerant. However, we find that Chinese students are less consistent in matching their perceived tolerance levels with actual scores from a standard risk tolerance assessment. Further, we also examine mock portfolios created by the respondents and find no evidence that Chinese students create portfolios that are riskier than their American counterparts. Our findings suggest that differences in risk tolerance are at least partially a product of culture, but such differences may not always translate into actual investment decisions.

Suggested Citation

  • Pyles, Mark K. & Li, Yongping & Wu, Shifang & Dolvin, Steven D., 2016. "Cultural influences on risk tolerance and portfolio creation," Journal of Behavioral and Experimental Finance, Elsevier, vol. 9(C), pages 43-55.
    • Handle: RePEc:eee:beexfi:v:9:y:2016:i:c:p:43-55
    DOI: 10.1016/j.jbef.2016.01.001
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    Cited by:

    1. Somya M. Eljilany & Ibrahim R. Hegazy & Ahmed F. Elbayoumi, 2023. "Risk-Taking in The Banking Sector: Do Cultural Differences Matter?," Journal of Accounting and Management Information Systems, Faculty of Accounting and Management Information Systems, The Bucharest University of Economic Studies, vol. 22(3), pages 464-489, September.
    2. Rabbani, Abed G. & Yao, Zheying & Wang, Christina, 2019. "Does personality predict financial risk tolerance of pre-retiree baby boomers?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 23(C), pages 124-132.
    3. Illiashenko, Pavlo & Laidroo, Laivi, 2020. "National culture and bank risk-taking: Contradictory case of individualism," Research in International Business and Finance, Elsevier, vol. 51(C).
    4. Shyue Chuan Chong & Han Kok Heng & Siok Jin Lim & Vejaratnam Navaratnam & Andaeus Zun Khan Neoh, 2021. "Financial Risk Tolerance: The Case of Older Chinese in Klang Valley, Malaysia 2020," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 12(2), pages 1-9, April.
    5. Kumar, Satish & Rao, Sandeep & Goyal, Kirti & Goyal, Nisha, 2022. "Journal of Behavioral and Experimental Finance: A bibliometric overview," Journal of Behavioral and Experimental Finance, Elsevier, vol. 34(C).
    6. Ashok Thomas & Luca Spataro, 2018. "Financial Literacy, Human Capital and Stock Market Participation in Europe," Journal of Family and Economic Issues, Springer, vol. 39(4), pages 532-550, December.
    7. Hellmann, Andreas & Patel, Chris & Tsunogaya, Noriyuki, 2021. "Foreign-language effect and professionals’ judgments on fair value measurement: Evidence from Germany and the United Kingdom," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
    8. Brent J. Davis, 2018. "Does financial well-being affect portfolio construction? Evidence from an online survey," Economics Bulletin, AccessEcon, vol. 38(1), pages 362-366.
    9. Fang Zhao & Jie Sun & Raj Devasagayam & Gary Clendenen, 2017. "Chinese-American Consumption of Financial Service: A Cultural Framework," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 7(7), pages 192-206, July.
    10. Illiashenko, Pavlo, 2019. "“Tough Guy” vs. “Cushion” hypothesis: How does individualism affect risk-taking?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 24(C).
    11. Sudarso Kaderi Wiryono & Mandra Lazuardi Kitri & Santi Novani & Prawira Fajarindra Belgiawan & Marla Setiawati, 2020. "Cultural Influences on Risk Tolerance: Evidence for Students in Indonesia," International Review of Management and Marketing, Econjournals, vol. 10(5), pages 1-4.
    12. Kylie J. Gilbey & Sharon Purchase, 2023. "Segmented financial risk tolerances within the standardised initial public offering regulatory environment of the Australian Securities Exchange," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(S1), pages 1447-1475, April.

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