Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
885145 | Journal of Economic Psychology | 2012 | 7 Pages |
Academics are divided as to whether financial risk tolerance is an enduring psychological trait and as a consequence is less likely to change over the life of an individual, or a variable psychological state which varies readily in response to internal and external influences. In this study we report the findings of a longitudinal study that investigates the annual change in financial risk tolerance scores of individuals over a 5 year period and the factors that influence such change. Our results indicate a relatively small annual change in individuals’ financial risk tolerance. Although our regression model is ineffective in providing a clarification for a change in the financial risk tolerance scores of individual respondents, we find a slight decrease in financial risk tolerance associated with a decrease in household size and an increase in financial risk tolerance after terminating the services of a financial planner. From our results we propose that financial risk tolerance is a stable personality trait and is unlikely to change substantially over the life of an individual.
► We study risk attitudes of Smart Money magazine’s investor surveys. ► We examine the same investors over a 5 year period. ► We find a small change in individuals’ financial risk tolerance over time. ► Financial risk tolerance is found to be a stable personality trait.