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A model for female South African investors’ financial risk tolerance

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  • J. Lawrenson
  • Z. Dickason-Koekemoer
  • David McMillan

Abstract

Research relating to the influence of investor’s demographic factors and personality traits on financial risk tolerance receives increasing attention. Financial risk tolerance refers to the degree of uncertainty an investor is willing to bear, with regards to the financial risks taken on. The investor’s personality refers to the stable characteristics an individual tends to display in any given situation. Personality traits may therefore also be considered as a driver in investor financial decisions. Understanding the influence gender and personality traits have on an investor’s financial risk tolerance, will assist in predicting their financial and investment decisions with regards to their asset portfolios. The purpose of this article is to develop a structural equation model for investment firms to more accurately profile their female investors, considering their personality traits, level of risk tolerance and level of education. Results from this study are in line with previous investment and portfolio management research. Results indicate that male investors are more risk-tolerant than their female counterparts. Furthermore, investors’ level of education significantly influenced their level of financial risk tolerance. Personality traits were found to influence female investors financial risk tolerance.

Suggested Citation

  • J. Lawrenson & Z. Dickason-Koekemoer & David McMillan, 2020. "A model for female South African investors’ financial risk tolerance," Cogent Economics & Finance, Taylor & Francis Journals, vol. 8(1), pages 1794493-179, January.
    • Handle: RePEc:taf:oaefxx:v:8:y:2020:i:1:p:1794493
    DOI: 10.1080/23322039.2020.1794493
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    Cited by:

    1. Antonios Evangelou & Sune Ferreira-Schenk & Lorainne Ferreira & Elizabeth Bothma, 2022. "Investment Risk Tolerance amongst South African University Students in the Vaal Triangle Area," International Journal of Economics and Financial Issues, Econjournals, vol. 12(1), pages 13-23.
    2. Kamini Rai & Abha Gupta & Anshu Tyagi, 2021. "Personality Traits Leads to Investor’s Financial Risk Tolerance: A Structural Equation Modelling Approach," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 46(4), pages 422-437, November.

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