Title: Impact of socio-demographic factors on the self-assessed financial risk tolerance of investors

Authors: Munmun Mohanty; Biswajit Prasad Chhatoi; Rajaram Rout

Addresses: Global Institute of Management, Bhubaneswar, Odisha-752101, India ' Berhampur University Berhampur, India ' Global Institute of Management, Bhubaneswar, Odisha-752101, India

Abstract: Substantial amount of research has been devoted to accurately estimate the risk tolerance of the individual as the suitability of the investment is dependent on it. However, limited amount of attention has been devoted to how individuals assess their own risk tolerance. The logistic regression has been used to determine the strength of predictors among all the demographic factors. It was found that the final equation was reached after four iterations and had gender, age, tax and family structure as the significant factors influencing the risk tolerance of investors. The male respondents were found to assess themselves as more risk tolerant as compared to female respondents and with increase in age the risk tolerance of the individual decreased linearly. However, the impact of tax and family structure, though significant, was not as clear. The wealth advisory industry, which has been heuristics approach to design the client portfolio, will definitely benefit from such insight. Having a clear understanding of the clients' self-assessment of risk will help them in successful delivery of suitability.

Keywords: financial risk tolerance; self-assessment; risk avoider; risk taker; logistic regression; binomial response; categorical variable.

DOI: 10.1504/IJBEX.2024.141639

International Journal of Business Excellence, 2024 Vol.34 No.2, pp.244 - 263

Received: 12 Aug 2020
Accepted: 25 Apr 2021
Published online: 30 Sep 2024 *

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