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Behavioural propensities and financial risk tolerance: the moderating effect of ethnicity

Author

Listed:
  • Mahfuzur Rahman
  • Mohamed Albaity
  • Che Ruhana Isa

Abstract

Purpose - The purpose of this paper is to explore the influence of several core behavioural propensities on financial risk tolerance (FRT). Additionally, this paper examines the moderating effect of ethnicity on the relationship between behavioural propensities and FRT. Design/methodology/approach - A sample of 1,204 completed and usable questionnaires were collected from undergraduate students majoring in business, economics and finance and analysed them using SmartPLS 2.0 software. Findings - The findings reveal that propensity for trust has the highest impact on FRT followed by propensity for regret and happiness in life, while propensity for social interaction is not significantly associated with FRT. Ethnicity significantly moderates the relationship between three behavioural propensities (propensity for regret, propensity for trust and happiness in life) and FRT. Originality/value - This study contributes to the assessment of individuals’ FRT incorporating behavioural propensities, which in turn contributes to the field of behavioural finance.

Suggested Citation

  • Mahfuzur Rahman & Mohamed Albaity & Che Ruhana Isa, 2019. "Behavioural propensities and financial risk tolerance: the moderating effect of ethnicity," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 15(4), pages 728-745, December.
    • Handle: RePEc:eme:ijoemp:ijoem-01-2018-0024
    DOI: 10.1108/IJOEM-01-2018-0024
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    More about this item

    Keywords

    Ethnicity; Financial risk tolerance; Happiness in life; Propensity for regret; Propensity for social interaction; Propensity for trust; G32; G110; M300;
    All these keywords.

    JEL classification:

    • 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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