Comfort with risk: a new perspective on risk tolerance

John E. Grable, Abed Rabbani and Liana Holanda Nepomuceno Nobre

Chapter 14 in Research Handbook on Personal Finance, 2026, pp 245-264 from Edward Elgar Publishing

Abstract: This chapter reviews key definitions and factors that influence how people conceptualize risk. It outlines how personal, psychological, and situational factors shape individual risk profiles and influence financial decisions. Comfort with risk varies across individuals and can change based on a household's circumstances. The chapter discusses methods to assess comfort with risk, such as propensity scales, stated-preference measures, and revealed-preference tests. It also explores the practical impact of risk comfort levels on financial outcomes. The behaviors of risk-averse individuals, who prioritize stability, differ from those who seek higher returns by taking risks. These differences are demonstrated through examples in investment choices, saving behaviors, and career decisions.

Keywords: Comfort with risk; Riisk tolerance; Risk aversion; Propensity scale; Stated-preference; Revealed-preference (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035323005
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