Grable, J. E. & Lytton, R. H. (1998). Investor
risk tolerance: testing the efficacy of demographics as differentiating
and classifying factors, Financial Counseling and Planning, 9
(1), 61-73.
Investor Risk Tolerance: Testing The Efficacy Of Demographics
As
Differentiating And Classifying Factors
John E. Grable(1) and
Ruth H. Lytton(2)
This study was designed to determine what variables would differentiate
between levels of investor risk tolerance and classify individuals into
risk tolerance categories. A model was developed and empirically tested
using data from the 1992 Survey of Consumer Finances. Multiple discriminant
analysis indicated that the educational level of respondents was the most
significant differentiating and classifying factor. Gender, self-employment
status, and income also were found to be effective in discriminating among
levels of risk tolerance. Demographic characteristic provide only a starting
point in accessing investor risk tolerance. More research is needed to
explain variations in risk tolerance.
Key Words: Demographics, Risk tolerance, Survey of Consumer Finances
1. John E. Grable, Assistant Professor, Department
of Merchandising, Environmental Design and Consumer Economics, Box 41162,
Texas Tech University, Lubbock, TX, 79409. Phone: (806) 742-3050. Fax:
(806) 742-1639. E-mail : jgrable@hs.ttu.edu
2. Ruth H. Lytton, Associate Professor, Department
of Near Environments, 101 Wallace Hall, Virginia Tech, Blacksburg, VA 24061.
Phone: (540) 231-6678. E-mail: rlytton@vt.edu
The authors thank Jaimie Sung for her assistance with data coding.