Title: The impact of heuristics on financial risk tolerance of individual investors

Authors: N.V. Suresh; V. Suganya; M. Kalaivani; Balaji Kanagasabai

Addresses: ASET College of Science and Technology, Kuthambakkam, Chembarambakkam, Tamil Nadu, India ' SRM Institute of Science and Technology, Potheri, Tamil Nadu, India ' SRM Institute of Science and Technology, Potheri, Tamil Nadu, India ' ASET College of Science and Technology, Kuthambakkam, Chembarambakkam, Tamil Nadu, India

Abstract: The main aim of this research study is to find the impact of heuristics (anchoring, availability, representativeness, gambler's fallacy and overconfidence) on the financial risk tolerance of investors. Heuristics are termed as 'rules of thumb' or 'mental shortcuts' that help in making inferences and assumptions from the available data to make decisions. Heuristics are the strategies that could be applied to problem-solving and are very often used to reduce the complexity of problems. The data collection is done among 602 individual investors in Chennai city using multi-stage sampling method. The regression analysis done using SPSS revealed that except anchoring all the other variables (availability, representativeness, gambler's fallacy and overconfidence) have a significant and positive impact on the financial risk tolerance. This study is the first of its kind to explore the relationship between heuristics and financial risk tolerance.

Keywords: risk tolerance; heuristics; individual investors.

DOI: 10.1504/IJAMS.2025.148095

International Journal of Applied Management Science, 2025 Vol.17 No.3, pp.252 - 267

Received: 31 Jan 2024
Accepted: 18 Jun 2024
Published online: 25 Aug 2025 *

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