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Locus of control and financial risk attitudes

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  • Kesavayuth, Dusanee
  • Ko, Kaung Myat
  • Zikos, Vasileios

Abstract

An extensive literature in economics investigates the relationship between cognitive abilities and financial risk attitudes. Yet, little is known about the importance of non-cognitive skills for financial risk attitudes. In this study, we focus on one specific non-cognitive skill, namely locus of control, which represents the extent to which an individual believes that life events are outcomes of his/her own actions. Using Australian panel data, we show that locus of control is positively related to the risk attitudes of older individuals who also differ significantly from younger individuals. The observed difference in risk attitudes between the young and the old is found among females but not males. These findings provide new empirical evidence on financial risk attitudes and how they relate to three sources of individual heterogeneity: locus of control, gender, and age group.

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  • Kesavayuth, Dusanee & Ko, Kaung Myat & Zikos, Vasileios, 2018. "Locus of control and financial risk attitudes," Economic Modelling, Elsevier, vol. 72(C), pages 122-131.
    • Handle: RePEc:eee:ecmode:v:72:y:2018:i:c:p:122-131
    DOI: 10.1016/j.econmod.2018.01.010
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    2. Caterina Cruciani & Gloria Gardenal & Giuseppe Amitrano, 2022. "Risk Tolerance Tools: From Academia to Regulation and Back," Springer Books, in: Understanding Financial Risk Tolerance, chapter 0, pages 39-78, Springer.
    3. Humphrey, Steven J. & Mondorf, Stefan, 2021. "Testing the causes of betrayal aversion," Economics Letters, Elsevier, vol. 198(C).
    4. Bonsang, Eric & Costa-Font, Joan, 2022. "Buying control? ‘Locus of control’ and the uptake of supplementary health insurance," Journal of Economic Behavior & Organization, Elsevier, vol. 204(C), pages 476-489.
    5. Elise Frølich Furrebøe & Ellen Katrine Nyhus, 2022. "Financial self‐efficacy, financial literacy, and gender: A review," Journal of Consumer Affairs, Wiley Blackwell, vol. 56(2), pages 743-765, June.
    6. Carmen Sainz Villalba, 2023. "Paternalism Preferences: Differences Across Genders," Working Papers tax-mpg-rps-2019-17, Max Planck Institute for Tax Law and Public Finance.
    7. Bucciol, Alessandro & Trucchi, Serena, 2021. "Locus of control and saving: The role of saving motives," Journal of Economic Psychology, Elsevier, vol. 86(C).
    8. Nkosivile Welcome Madinga & Eugine Tafadzwa Maziriri & Tinashe Chuchu & Zinzi Magoda, 2022. "An Investigation of the Impact of Financial Literacy and Financial Socialization on Financial Satisfaction: Mediating Role of Financial Risk Attitude," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 14(1), pages 60-75, January.
    9. Nguyen, Le Bao Ngoc & Kesavayuth, Dusanee & Rangkakulnuwat, Poomthan, 2022. "Effect of Locus of Control on Job Performance: Evidence from Australian Panel Data," Asian Journal of Applied Economics, Kasetsart University, Center for Applied Economics Research, vol. 29(1).
    10. Maslina Mansor & Mohamad Fazli Sabri & Mustazar Mansur & Muslimah Ithnin & Amirah Shazana Magli & Abd Rahim Husniyah & Nurul Shahnaz Mahdzan & Mohd Amim Othman & Roza Hazli Zakaria & Nurulhuda Mohd Sa, 2022. "Analysing the Predictors of Financial Stress and Financial Well-Being among the Bottom 40 Percent (B40) Households in Malaysia," IJERPH, MDPI, vol. 19(19), pages 1-23, September.
    11. Kesavayuth, Dusanee & Poyago-Theotoky, Joanna & Tran, Dai Binh & Zikos, Vasileios, 2020. "Locus of control, health and healthcare utilization," Economic Modelling, Elsevier, vol. 86(C), pages 227-238.
    12. Piotr Bialowolski & Dorota Weziak-Bialowolska & Eileen McNeely, 2021. "The Role of Financial Fragility and Financial Control for Well-Being," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 155(3), pages 1137-1157, June.
    13. Muhammad S. Tahir & Abdullahi D. Ahmed, 2021. "Australians’ Financial Wellbeing and Household Debt: A Panel Analysis," JRFM, MDPI, vol. 14(11), pages 1-14, October.

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    More about this item

    Keywords

    Locus of control; Risk attitude; HILDA;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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