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

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.

Citation

Rahman, M., Albaity, M. and Isa, C.R. (2020), "Behavioural propensities and financial risk tolerance: the moderating effect of ethnicity", International Journal of Emerging Markets, Vol. 15 No. 4, pp. 728-745. https://doi.org/10.1108/IJOEM-01-2018-0024