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Financial risk tolerance of individuals from the lens of big five personality traits – a multigenerational perspective

Crystal Glenda Rodrigues (School of Humanities, Social Sciences and Management, National Institute of Technology Karnataka, Mangalore, India)
Gopalakrishna B.V. (School of Humanities, Social Sciences and Management, National Institute of Technology Karnataka, Mangalore, India)

Studies in Economics and Finance

ISSN: 1086-7376

Article publication date: 17 April 2023

Issue publication date: 25 January 2024

394

Abstract

Purpose

This study aims to analyse the impact of the big five personality traits on the financial risk tolerance of individuals. Furthermore, it also examines the differences in personality traits and financial risk tolerance across four generations: baby boomers, Generation X, millennials and Generation Z.

Design/methodology/approach

The data constituted 869 responses from Indian individuals, collected using a self-administered structured questionnaire using a convenience sampling technique.

Findings

Structural equation modelling analysis showed that openness to experience, extraversion and neuroticism had a significant impact on financial risk tolerance. Multivariate analysis revealed the role of specific personality traits in predicting the financial risk tolerance of generational cohorts. Mean difference showed that millennials and Generation Z had the greatest risk tolerance, whereas the tolerance levels were lower for Generation X and baby boomers.

Research limitations/implications

This research provides insights into the role of personality on financial risk-taking among generational cohorts in India. Thus, these results cannot be generalised for other risk-taking domains or outside the Indian context.

Originality/value

This study’s results align with the pulse rate hypothesis of generational theory and contribute to the growing field of behavioural economics and finance. It provides a perspective of the emerging economy of India, where behavioural finance studies are still at a nascent stage.

Keywords

Acknowledgements

The authors would like to thank the Editor(s) and Reviewers for taking the time and effort necessary to review the manuscript. The authors sincerely appreciate all valuable comments and suggestions, which helped them to improve the quality of the manuscript.

The research work has been carried out without support from any organisation and is the work of the researchers only.

Ethics statement: The research article is original, has not been submitted elsewhere and is not under consideration with any other publication. The work does not include libellous, defamatory or unlawful statements.

Funding: This research did not receive any specific grant from funding agencies in the public, commercial or not-for-profit sectors.

Citation

Rodrigues, C.G. and B.V., G. (2024), "Financial risk tolerance of individuals from the lens of big five personality traits – a multigenerational perspective", Studies in Economics and Finance, Vol. 41 No. 1, pp. 88-101. https://doi.org/10.1108/SEF-01-2023-0013

Publisher

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Emerald Publishing Limited

Copyright © 2023, Emerald Publishing Limited

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