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The impact of financial literacy and financial interest on risk tolerance

Cecilia Hermansson () and Sara Jonsson ()
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Sara Jonsson: Stockholm University, Postal: Stockholm Business School, 106 91 Stockholm, Sweden

No 19/9, Working Paper Series from Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance

Abstract: We investigate and compare the effects of financial literacy and financial interest on risk tolerance, evaluating not only at the means, but also at the whole distribution. We use a unique sample of 12,156 Swedish bank customers combining bank-register data with survey data. Results show that both financial literacy and financial interest are associated with higher risk tolerance. They further show that the impact of financial interest is significantly higher than the impact of financial literacy. Differences are also observed across the distribution. Quantile regressions show that financial interest has its greatest association at the medium-to-high range of risk tolerance, whereas financial literacy shows its greatest association at the lower range of risk tolerance. Findings contribute to the literature on risk tolerance, specifically pointing to the relevance of the noncognitive trait, interest, to individuals’ risk tolerance.

Keywords: Financial risk tolerance; financial literacy; financial interest; quantile regression (search for similar items in EconPapers)
JEL-codes: D83 D91 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2019-11-18
New Economics Papers: this item is included in nep-cfn and nep-fle
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Related works:
Journal Article: The impact of financial literacy and financial interest on risk tolerance (2021) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:kthrec:2019_009

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