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FINANCIAL RISK TOLERANCE AND SELECTED DEMOGRAPHIC FACTORS: A COMPARATIVE STUDY IN 3 COUNTRIES

Alan Wong

Indiana University, U.S.A.

 

ABSTRACT

This study indicates that financial risk tolerance increases with education and income. However, risk tolerance decreases with age, female, and marriage. Australia has the highest risk tolerance score, followed by the United States, and finally the United Kingdom in a country comparative analysis. This finding appears to contradict the work of Hofstede (2009) which indicates that Australia and the United Kingdom have the highest and lowest uncertainty avoidance scores, respectively, of the three countries. A more detailed analysis of selected questionnaire questions shows that the U.S. respondents are most willing to tolerate more risks if they have achieved a basic level of protection. The U.S. respondents also tend to show the highest amount of confidence in making financial decisions and the most willing to adapt when things go wrong. This study generates some interesting implications that warrant further investigation and also provide suggestions for further research opportunities.

Key Words: Financial risk tolerance, demographic factors, comparative study, U.S.A, U.K., Australia

JEL codes: G11, A14, D81