Measuring the perception of financial risk tolerance: A tale of two measures

John Gilliam, S. Chatterjee, J. Grable

Research output: Contribution to journalArticle

Abstract

The assessment of financial risk tolerance, as a tool for managing expectations of portfolio volatility, is essential to goal attainment. This study compares two empirical measures of risk tolerance and separately examines the association between these measures of risk tolerance and asset allocation. The instruments used to determine investors’ perception of financial risk tolerance are the Survey of Consumer Finance’s (SCF) single-question measure and a 13-item, multidimensional measure developed by Grable and Lytton (1999). A sample comprised of 328 respondents, predominantly faculty and staff at colleges and universities in the Southwest, completed a 38-question, web-based survey. Results suggest that, while both scales are associated with preference for risky or non-risky asset allocation among respondents, the 13-item scale has greater explanatory power.
Original languageEnglish
Pages (from-to)30-43
JournalJournal of Financial Counseling and Planning
StatePublished - Oct 2010

Fingerprint Dive into the research topics of 'Measuring the perception of financial risk tolerance: A tale of two measures'. Together they form a unique fingerprint.

  • Cite this