The Brighter Side of Financial Risk: Financial Risk Tolerance and Wealth

Abstract

Investors who accept a greater degree of financial risk expect to benefit from higher returns and greater wealth over time. This study explores the relationship between net worth and net financial assets and risk tolerance using data from the 1998 Survey of Consumer Finances. Willingness to take financial risk is associated with a significantly higher net worth for the whole sample, and for samples within age groups. Risk tolerance among those over 65 is among the strongest predictors of a higher net worth.

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Finke, M.S., Huston, S.J. The Brighter Side of Financial Risk: Financial Risk Tolerance and Wealth. Journal of Family and Economic Issues 24, 233–256 (2003). https://doi.org/10.1023/A:1025443204681

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  • risk tolerance
  • wealth accumulation