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Financial Literacy, Risk Tolerance and Stock Market Participation

Author

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  • Mishra, Rajesh

    (Faculty, ICFAI Business School, Gurgaon, Haryana, India)

Abstract

This study explores how households’ stock market investment decisions are influenced by self-assessed financial literacy, investment awareness, risk propensity and socio-economic characteristics. This study used national survey data of Indian households across the country, a survey conducted by SEBI (Securities and Exchange Board of India) to get a comprehensive view of households’ characteristics, behaviour and investment patterns. The results of logistic regression indicate that individual having more risk tolerance, financial literacy, and investment awareness significantly influences the stock market investment decisions. ANOVA results indicate the significant difference among different groups of responding households according to age, education, zone, saving, debt, and income level while no significant difference found in level of stock market participation based on gender, occupation, and marital status. The results also validate the usefulness of financial education programme for enhancing the financial awareness among households that positively impacts the investment decision regarding stock market investments.

Suggested Citation

  • Mishra, Rajesh, 2018. "Financial Literacy, Risk Tolerance and Stock Market Participation," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(12), pages 1457-1471.
    • Handle: RePEc:asi:aeafrj:v:8:y:2018:i:12:p:1457-1471:id:1768
    DOI: 10.18488/journal.aefr.2018.812.1457.1471
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    Cited by:

    1. Renu Isidore & C. Joe Arun, 2023. "The Moderating Effect of Financial Literacy on the Relationship Between Decision-Making Tools and Equity Returns in the Indian Secondary Equity Market," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 15(1), pages 185-211.
    2. Harshita Srivastava & Sana Moid & Naela Jamal Rushdi, 2025. "Risk Tolerance and Stock Market Investment Decisions: A Bibliometric Analysis," Metamorphosis: A Journal of Management Research, , vol. 24(2), pages 202-213, December.
    3. S. Ananda & Raghavendra Prasanna Kumar & Tamanna Dalwai, 2024. "Impact of financial literacy on savings behavior: the moderation role of risk aversion and financial confidence," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 29(3), pages 843-854, September.
    4. John Grable & Eun Jin Kwak & Martha Fulk & Aditi Routh, 2022. "A Simplified Measure of Investor Risk Aversion," Journal of Interdisciplinary Economics, , vol. 34(1), pages 7-34, January.
    5. Lu, Zhiqiang & Wu, Junjie & Li, Hongyu & Galloway, Brian, 2024. "Digital finance and stock market participation: The case of internet wealth management products in China," Economic Systems, Elsevier, vol. 48(1).
    6. Anu Mohta & V Shunmugasundaram, 2023. "Millennials’ financial literacy and risk behavior: evidence from India," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 70(4), pages 419-435, December.
    7. Ivan Skliarov & Łukasz Goczek, 2024. "What Makes a Household Wealthy? Is it Reckless Risk-Taking or Careful Planning?," LWS Working papers 42, LIS Cross-National Data Center in Luxembourg.
    8. Farhat Aziz Lone & Shalini Aggarwal & Sanjeev Jain, 2026. "Retail Investors’ Perception Towards Green Bonds in Advancing Sustainability: Evidence from India," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 33(1), pages 119-148, March.
    9. Suhaily Maizan Abdul Manaf & Mohd Talmizie Amron & Zalinawati Abdullah & Zuraida Mohamad & Sahaida Laily Md Hashim, 2024. "Fostering Future Investors: Analysing Determinants of Stock Market Participation Among Malaysian Students using PLS-SEM," Information Management and Business Review, AMH International, vol. 16(3), pages 452-463.
    10. Shulin Xu & Kangqi Jiang, 2024. "Knowledge creates value: the role of financial literacy in entrepreneurial behavior," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-17, December.

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