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Patterns of financial risk tolerance: 1983 - 2001

Yao, Rui
http://rave.ohiolink.edu/etdc/view?acc_num=osu1060624755

Abstract Details

2004, Doctor of Philosophy, Ohio State University, Family Resource Management.
Risk tolerance is a key factor in household portfolio decisions, and understanding the determinants of financial risk tolerance is an important contribution of this dissertation. This study focuses on the Survey of Consumer Finances (SCF) risk tolerance question, which asks respondents to select either substantial, above-average, average, or no risk when making investments. Using all SCF cross-sectional datasets conducted between 1983 and 2001, this dissertation is the first study to analyze risk tolerance changes over an 18-year period. Multivariate cumulative logits were run with the SCF risk tolerance variable as the dependent variable. Controlling for other characteristics, risk tolerance generally increased from 1992 until 1998, then dropped slightly but not significantly in 2001. In 1998, respondents were 1.7 times as likely as those in 1992 to have substantial or above-average risk tolerance. In addition to analyzing trends in risk tolerance over time, this research reports on demographic effects. Many of the effects of demographic variables were statistically significant because of the large sample size resulting from the combined dataset. The dataset also allows for robust estimates of differences between demographic groups. The probability of taking some risk and substantial or above-average risk increased strongly with education. Generally, age had a negative effect on risk tolerance, with those under 30 being 4.7 times as likely as those age 75 or over to have substantial or above-average risk tolerance, and twice as likely as respondents between age 55 and 59 to have some risk tolerance. This study is unique in differentiating by gender of the respondent in married couple households. Married females were shown to be less risk tolerant than married males, and single males were more risk tolerant than single females and married respondents. Non-Hispanic Whites were much more likely to take some financial risk than otherwise similar respondents from other races, and non-Hispanic Blacks and Hispanics were more likely than non-Hispanic Whites to take substantial risk. Risk tolerance did not change significantly between 1998 and 2001, and the percent of households holding stocks increased from 49% to 53%. Based on previous patterns, risk tolerance seems likely to decrease by 2004.
Sherman Hanna (Advisor)
financial risk tolerance; SCF

Recommended Citations

Citations

  • Yao, R. (2004). Patterns of financial risk tolerance: 1983 - 2001 [Doctoral dissertation, Ohio State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=osu1060624755

    APA Style (7th edition)

  • Yao, Rui. Patterns of financial risk tolerance: 1983 - 2001. 2004. Ohio State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=osu1060624755.

    MLA Style (8th edition)

  • Yao, Rui. "Patterns of financial risk tolerance: 1983 - 2001." Doctoral dissertation, Ohio State University, 2004. http://rave.ohiolink.edu/etdc/view?acc_num=osu1060624755

    Chicago Manual of Style (17th edition)

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This open access ETD is published by The Ohio State University and OhioLINK.