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Impact of Demographic Variables and Risk Tolerance on Investment Decisions: An Empirical Analysis

Author

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  • Kavita Chavali

    (Department of Accounting and Finance, College of Commerce and Business Administration, Dhofar University, Sultanate of Oman,)

  • M. Prasanna Mohanraj

    (School of Business, Alliance University, Bengaluru, Karnataka, India.)

Abstract

This empirical study explores the investment pattern and financial decision making of individuals and their risk tolerance. The study has adopted financial risk tolerance scale proposed by Grable and Lytton to measure the different dimensions of financial risk. Kendall's W test is used to ascertain the preferred source of investment of individuals. Chi-square test is used to determine the demographic variables and their relationship with investment pattern. The study reveals that gender has an impact on the investment pattern and decision making of respondents.

Suggested Citation

  • Kavita Chavali & M. Prasanna Mohanraj, 2016. "Impact of Demographic Variables and Risk Tolerance on Investment Decisions: An Empirical Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 6(1), pages 169-175.
    • Handle: RePEc:eco:journ1:2016-01-22
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    References listed on IDEAS

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    1. Helga Fehr-Duda & Adrian Bruhin & Thomas Epper & Renate Schubert, 2010. "Rationality on the rise: Why relative risk aversion increases with stake size," Journal of Risk and Uncertainty, Springer, vol. 40(2), pages 147-180, April.
    2. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    3. Grable, John & Lytton, Ruth H., 1999. "Financial risk tolerance revisited: the development of a risk assessment instrument," Financial Services Review, Elsevier, vol. 8(3), pages 163-181.
    4. Lewellen, Wilbur G & Lease, Ronald C & Schlarbaum, Gary G, 1977. "Patterns of Investment Strategy and Behavior among Individual Investors," The Journal of Business, University of Chicago Press, vol. 50(3), pages 296-333, July.
    5. Hersh Shefrin & Meir Statman, 1993. "Behavioral Aspects of the Design and Marketing of Financial Products," Financial Management, Financial Management Association, vol. 22(2), Summer.
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    Citations

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    Cited by:

    1. Babli Dhiman & Saloni Raheja, 2018. "Do Personality Traits and Emotional Intelligence of Investors Determine Their Risk Tolerance?," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 43(1-2), pages 88-99, February.
    2. Rajdeep Kumar Raut & Rohit Kumar, 2023. "Do Values Predict Socially Responsible Investment Decisions? Measuring the Moderating Effects of Gender," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 22(2), pages 189-214, June.
    3. Raza Ullah & Iqra Sarwar & Syed Muhammad Amir & Muhammad Rafay Muzamil & Ehsan Inamullah, 2023. "Risk Tolerance and Investment Decisions among Credit Beneficiaries," Journal of Economic Impact, Science Impact Publishers, vol. 5(3), pages 211-216.
    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. Michael du Preez & SJ Ferreira-Schenk, 2024. "Demographic and Sociocultural Determinants of Financial Literacy in South Africa," International Journal of Economics and Financial Issues, Econjournals, vol. 14(2), pages 111-119, March.
    6. Reinhard Furtner & Elida Motro-Iljazi & Eva Jančíková, 2021. "Money Attitudes Comparison between Austrian and Albanian Students," Economic Research Guardian, Weissberg Publishing, vol. 11(1), pages 14-26, June.
    7. George Obeng, 2019. "Behavioural Antecedents Complementing Classical Financial Models for Rational Decision Making," International Journal of Publication and Social Studies, Asian Economic and Social Society, vol. 4(2), pages 111-122, June.
    8. John Grable & Dee Warmath & Eun Jin Kwak, 2022. "An Assessment of the Association between Political Orientation and Financial Risk Tolerance," JRFM, MDPI, vol. 15(5), pages 1-16, April.
    9. Umair Baig & Batool Muhammad Hussain & Vida Davidaviciene & Ieva Meidute-Kavaliauskiene, 2021. "Exploring Investment Behavior of Women Entrepreneur: Some Future Directions," IJFS, MDPI, vol. 9(2), pages 1-15, April.
    10. Syed Aliya Zahera & Rohit Bansal, 2018. "Do investors exhibit behavioral biases in investment decision making? A systematic review," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 10(2), pages 210-251, May.
    11. Biswajit Prasad Chhatoi & Munmun Mohanty, 2023. "Discriminants of risk tolerance among Indian investors: a dichotomous discriminant approach," International Journal of Managerial and Financial Accounting, Inderscience Enterprises Ltd, vol. 15(1), pages 112-134.
    12. Yogita Singh & Mohd. Adil & S. M. Imamul Haque, 2023. "Personality traits and behaviour biases: the moderating role of risk-tolerance," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(4), pages 3549-3573, August.

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    More about this item

    Keywords

    Risk Tolerance; Demographics; Investment Pattern; Investment Decision;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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