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DETERMINANTS OF RISK TOLERANCE: EMPIRICAL EVIDENCE FROM KYRGYZSTAN

Year 2016, Issue: 69, 54 - 61, 01.05.2016

Kamalbek Karymshakov , Raziya Abdieva , Burulcha Sulaimanova

Abstract

This study analyses the determinants of the risk tolerance in Kyrgyzstan, by using nationally representative “Life in Kyrgyzstan” survey for 2011. The results of multinomial probit models show that men more willing to take risk and that as the age increases individuals become risk-averse. In-creasing income and education level has a positive effect on the risk taking decision of the individual. The regional distribution of risk tolerance of individuals shows that individuals living in rural areas and in south region are more likely to be in risk-averse category.
The first version of this paper was presented at the annual “Life in Kyrgyzstan” conference in Bishkek, Kyrgyzstan on October 1-2, 2015.

Keywords

risk tolerance multinomial probit Kyrgyzstan

References

  • Al-Ajmi, J. Y. Risk Tolerance of Individual Investors in an Emerging Market // Journal of Risk and Diversification. ISSN 1986-4337. Issue 2. – 2011: http://www.journalofriskanddiversification.com
  • Bertaut, C. C. Stockholding behavior of U.S. households: evidence from the 1983–1989 Survey of Consumer Finances // Review of Economics and Statistics. – 1998. №. 80 (2). – P. 263-275.
  • Bruce, A. and Johnson, J. Male and female betting behavior: new perspectives // Journal of Gambling Studies. – 1994. №10. – P. 183-98.
  • Bymes, J. P., Miller, D. C. and Schafer, W. D. Gender Differences in Risk Taking: A Meta-Analysis // Psychological Bulletin. – 1999. № 125. – P. 367-383.
  • Cameron, A. S. and Trivedi P. K. Microeconometrics: Methods and applications. – Cam-bridge: Cambridge University Press, 2005.
  • Christiansen, C., Joensen, J. S. and Rangvid, J. Genders, Marriage and the Decision to In-vest in Stock and Bonds: Do Single Women Invest More in Less Risky Assets? // D-CAF Working Paper No. 18. School of Economics and Management, University of Aarhus, Denmark. 2006.
  • Çağlayan, E. and Abdieva, R. Asian Economic and Fınancıal Review. – 2014. Vol. 4. № 3. – P. 404-415.
  • Faff, R., Hallahan, T., & McKenzie, M. Women and risk tolerance in an aging world // In-ternational Journal of Accounting and Information Management. – 2011. №19(2). – P.100-117.
  • Feng, L. and Seasholes, M. S. Individual investors and gender similarities in an emerging stock market // Pacific-Basin Finance Journal. – 2007. Online version posted on 4 May 2007.
  • Grable, J. E. and Lytton, R. H. Financial risk tolerance revisited: The development of a risk assessment instrument // Financial Services Review 8. – 1999. – P.163-181.
  • Grable, J. E. Financial risk tolerance and additional factors that affect risk taking in every-day money matters // Journal of Business and Psychology. – 2000. №14 (4). – P. 625-630.
  • Grable, J. E., Lytton, R. H. Investor risk tolerance: testing the efficacy of demographics as differentiating and classifying factors // Financial Counseling and Planning 9. – 1998. – P. 61-73.
  • Grable, J. and Joo, S. Environmental and Biopsychosocial Factors Associated with Risk Tolerance // Financial Counseling and Planning. – 2004. №15(1). – P. 73-82.
  • Grable, J. E. and Roszkowski, M.J. Self_assessments of risk tolerance by women and men // Psychological Reports. – 2007. №100(3 I). – P. 795-802.
  • Guiso, L., Haliassos, M. and Jappelli, T. Household stockholding in Europe: Where Do We Stand and Where Do We Go? // Economic Policy. – 2003. №18. – P. 123-170.
  • Guiso, L., Jappelli, T., Terlizzese, D. Income risk, borrowing constraints, and portfolio choice // American Economic Review. – 1996. №86 (1). – P. 158-172.
  • Haliassos, M. and Bertaut, C. C. Why do so few hold stocks? // Economic Journal. – 1995. № 105. – P. 1110-1129.
  • Hui, W., Hanna, S. Does risk tolerance decrease with age? // Financial Counseling and Planning. – 1997. № 8 (2). – P. 27-31.
  • Kover, A. Okay, women really could use special advice about investing // Fortune. – 1999. № 139. – P. 129-32.
  • Leuermann, A. Essays on Risk Preferences and Behavioral Finance // Inaugural-Dissertation zur Erlangung der Wurde eines ¨Doktors der Wirtschaftswissenschaften an der Fakultat f¨ ur Wirtschafts- und Sozialwissenschaften der¨. – Ruprecht-Karls-Universitat Heidelberg. 2012: http://archiv.ub.uni-heidelberg.de/volltextserver/14388/1/THESIS.pdf (20.11.2015)
  • Lewellen, W., Lease, R. and Schlarbaum, G. Patterns of investment strategy and behavior among individual investors // Journal of Business. – 1977. №50. – P. 296-333.
  • Mankiw, G. N. and Zeldes, S. The consumption of stockholders and nonstockholders // Journal of Financial Economics. – 1991. №29. – P. 97-112.
  • Morin, R.A., Suarez, A.E. Risk aversion revisited // The Journal of Finance. – 1983. №38. – P. 1201-1216.
  • Schooley, D. K. and Worden, D. D. Investors’ Asset allocations versus life-cycle Funds // Financial Analysts Journal. – 1999. № 5. – P. 37-43.
  • Wang, H., Hanna, S. D. Does risk tolerance decrease with age? // Financial Coun-seling and Planning. – 1997. №8 (2). – P. 27-31.
  • Yao, R., Hanna, S. D., Lindamood, S. Changes in financial risk tolerance, 1983-2001 // Fi-nancial Services Review. – 2004. №13 (4). – P. 249-266.
  • Yao, R., Sharpe, L.D. and F. Wang. Decomposing the age effect on risk tolerance // The Journal of Socio-Economics. – 2011. №40. – P. 879- 887.
  • Zhong, L. X., Xiao, J. J.. Determinants of family bond and stock holdings // Financial Counseling and Planning. – 1995. №6. – P. 107-114.

DETERMINANTS OF RISK TOLERANCE: EMPIRICAL EVIDENCE FROM KYRGYZSTAN

Year 2016, Issue: 69, 54 - 61, 01.05.2016

Kamalbek Karymshakov , Raziya Abdieva , Burulcha Sulaimanova

Abstract

This study analyses the determinants of the risk tolerance in Kyrgyzstan, by using nationally representative “Life in Kyrgyzstan” survey for 2011. The results of multinomial probit models show that men more willing to take risk and that as the age increases individuals become risk-averse. In-creasing income and education level has a positive effect on the risk taking decision of the individual. The regional distribution of risk tolerance of individuals shows that individuals living in rural areas and in south region are more likely to be in risk-averse category.
The first version of this paper was presented at the annual “Life in Kyrgyzstan” conference in Bishkek, Kyrgyzstan on October 1-2, 2015.

Keywords

risk tolerance multinomial probit Kyrgyzstan

References

  • Al-Ajmi, J. Y. Risk Tolerance of Individual Investors in an Emerging Market // Journal of Risk and Diversification. ISSN 1986-4337. Issue 2. – 2011: http://www.journalofriskanddiversification.com
  • Bertaut, C. C. Stockholding behavior of U.S. households: evidence from the 1983–1989 Survey of Consumer Finances // Review of Economics and Statistics. – 1998. №. 80 (2). – P. 263-275.
  • Bruce, A. and Johnson, J. Male and female betting behavior: new perspectives // Journal of Gambling Studies. – 1994. №10. – P. 183-98.
  • Bymes, J. P., Miller, D. C. and Schafer, W. D. Gender Differences in Risk Taking: A Meta-Analysis // Psychological Bulletin. – 1999. № 125. – P. 367-383.
  • Cameron, A. S. and Trivedi P. K. Microeconometrics: Methods and applications. – Cam-bridge: Cambridge University Press, 2005.
  • Christiansen, C., Joensen, J. S. and Rangvid, J. Genders, Marriage and the Decision to In-vest in Stock and Bonds: Do Single Women Invest More in Less Risky Assets? // D-CAF Working Paper No. 18. School of Economics and Management, University of Aarhus, Denmark. 2006.
  • Çağlayan, E. and Abdieva, R. Asian Economic and Fınancıal Review. – 2014. Vol. 4. № 3. – P. 404-415.
  • Faff, R., Hallahan, T., & McKenzie, M. Women and risk tolerance in an aging world // In-ternational Journal of Accounting and Information Management. – 2011. №19(2). – P.100-117.
  • Feng, L. and Seasholes, M. S. Individual investors and gender similarities in an emerging stock market // Pacific-Basin Finance Journal. – 2007. Online version posted on 4 May 2007.
  • Grable, J. E. and Lytton, R. H. Financial risk tolerance revisited: The development of a risk assessment instrument // Financial Services Review 8. – 1999. – P.163-181.
  • Grable, J. E. Financial risk tolerance and additional factors that affect risk taking in every-day money matters // Journal of Business and Psychology. – 2000. №14 (4). – P. 625-630.
  • Grable, J. E., Lytton, R. H. Investor risk tolerance: testing the efficacy of demographics as differentiating and classifying factors // Financial Counseling and Planning 9. – 1998. – P. 61-73.
  • Grable, J. and Joo, S. Environmental and Biopsychosocial Factors Associated with Risk Tolerance // Financial Counseling and Planning. – 2004. №15(1). – P. 73-82.
  • Grable, J. E. and Roszkowski, M.J. Self_assessments of risk tolerance by women and men // Psychological Reports. – 2007. №100(3 I). – P. 795-802.
  • Guiso, L., Haliassos, M. and Jappelli, T. Household stockholding in Europe: Where Do We Stand and Where Do We Go? // Economic Policy. – 2003. №18. – P. 123-170.
  • Guiso, L., Jappelli, T., Terlizzese, D. Income risk, borrowing constraints, and portfolio choice // American Economic Review. – 1996. №86 (1). – P. 158-172.
  • Haliassos, M. and Bertaut, C. C. Why do so few hold stocks? // Economic Journal. – 1995. № 105. – P. 1110-1129.
  • Hui, W., Hanna, S. Does risk tolerance decrease with age? // Financial Counseling and Planning. – 1997. № 8 (2). – P. 27-31.
  • Kover, A. Okay, women really could use special advice about investing // Fortune. – 1999. № 139. – P. 129-32.
  • Leuermann, A. Essays on Risk Preferences and Behavioral Finance // Inaugural-Dissertation zur Erlangung der Wurde eines ¨Doktors der Wirtschaftswissenschaften an der Fakultat f¨ ur Wirtschafts- und Sozialwissenschaften der¨. – Ruprecht-Karls-Universitat Heidelberg. 2012: http://archiv.ub.uni-heidelberg.de/volltextserver/14388/1/THESIS.pdf (20.11.2015)
  • Lewellen, W., Lease, R. and Schlarbaum, G. Patterns of investment strategy and behavior among individual investors // Journal of Business. – 1977. №50. – P. 296-333.
  • Mankiw, G. N. and Zeldes, S. The consumption of stockholders and nonstockholders // Journal of Financial Economics. – 1991. №29. – P. 97-112.
  • Morin, R.A., Suarez, A.E. Risk aversion revisited // The Journal of Finance. – 1983. №38. – P. 1201-1216.
  • Schooley, D. K. and Worden, D. D. Investors’ Asset allocations versus life-cycle Funds // Financial Analysts Journal. – 1999. № 5. – P. 37-43.
  • Wang, H., Hanna, S. D. Does risk tolerance decrease with age? // Financial Coun-seling and Planning. – 1997. №8 (2). – P. 27-31.
  • Yao, R., Hanna, S. D., Lindamood, S. Changes in financial risk tolerance, 1983-2001 // Fi-nancial Services Review. – 2004. №13 (4). – P. 249-266.
  • Yao, R., Sharpe, L.D. and F. Wang. Decomposing the age effect on risk tolerance // The Journal of Socio-Economics. – 2011. №40. – P. 879- 887.
  • Zhong, L. X., Xiao, J. J.. Determinants of family bond and stock holdings // Financial Counseling and Planning. – 1995. №6. – P. 107-114.

Year 2016, Issue: 69, 54 - 61, 01.05.2016

Kamalbek Karymshakov , Raziya Abdieva , Burulcha Sulaimanova

Abstract

Данное исследование анализирует факторы, влияющие на толерантность населения к риску в Кыргызстане. Для эконометрических расчетов были использованы данные опроса «Жизнь в Кыргызстане» за 2011 г. Результаты мультиномиальных пробит-моделей показы-вают, что мужчины готовы взять на себя риск в большей степени, чем женщины, и что с уве-личением возраста люди становятся менее склонны к риску. Уровень дохода и образования оказывает положительное влияние на склонность к риску. Региональное распределение толе-рантности к риску показывает, что люди, живущие в сельской местности и в южном регионе страны, менее склонны к риску.

Первая версия этой статьи была представлена на ежегодной конференции «Жизнь в Кыргызстане» в Бишкеке 1-2 октября 2015 года.

Keywords

толерантность к риску мультиномиальная пробит-модель Кыргызстан

References

  • Al-Ajmi, J. Y. Risk Tolerance of Individual Investors in an Emerging Market // Journal of Risk and Diversification. ISSN 1986-4337. Issue 2. – 2011: http://www.journalofriskanddiversification.com
  • Bertaut, C. C. Stockholding behavior of U.S. households: evidence from the 1983–1989 Survey of Consumer Finances // Review of Economics and Statistics. – 1998. №. 80 (2). – P. 263-275.
  • Bruce, A. and Johnson, J. Male and female betting behavior: new perspectives // Journal of Gambling Studies. – 1994. №10. – P. 183-98.
  • Bymes, J. P., Miller, D. C. and Schafer, W. D. Gender Differences in Risk Taking: A Meta-Analysis // Psychological Bulletin. – 1999. № 125. – P. 367-383.
  • Cameron, A. S. and Trivedi P. K. Microeconometrics: Methods and applications. – Cam-bridge: Cambridge University Press, 2005.
  • Christiansen, C., Joensen, J. S. and Rangvid, J. Genders, Marriage and the Decision to In-vest in Stock and Bonds: Do Single Women Invest More in Less Risky Assets? // D-CAF Working Paper No. 18. School of Economics and Management, University of Aarhus, Denmark. 2006.
  • Çağlayan, E. and Abdieva, R. Asian Economic and Fınancıal Review. – 2014. Vol. 4. № 3. – P. 404-415.
  • Faff, R., Hallahan, T., & McKenzie, M. Women and risk tolerance in an aging world // In-ternational Journal of Accounting and Information Management. – 2011. №19(2). – P.100-117.
  • Feng, L. and Seasholes, M. S. Individual investors and gender similarities in an emerging stock market // Pacific-Basin Finance Journal. – 2007. Online version posted on 4 May 2007.
  • Grable, J. E. and Lytton, R. H. Financial risk tolerance revisited: The development of a risk assessment instrument // Financial Services Review 8. – 1999. – P.163-181.
  • Grable, J. E. Financial risk tolerance and additional factors that affect risk taking in every-day money matters // Journal of Business and Psychology. – 2000. №14 (4). – P. 625-630.
  • Grable, J. E., Lytton, R. H. Investor risk tolerance: testing the efficacy of demographics as differentiating and classifying factors // Financial Counseling and Planning 9. – 1998. – P. 61-73.
  • Grable, J. and Joo, S. Environmental and Biopsychosocial Factors Associated with Risk Tolerance // Financial Counseling and Planning. – 2004. №15(1). – P. 73-82.
  • Grable, J. E. and Roszkowski, M.J. Self_assessments of risk tolerance by women and men // Psychological Reports. – 2007. №100(3 I). – P. 795-802.
  • Guiso, L., Haliassos, M. and Jappelli, T. Household stockholding in Europe: Where Do We Stand and Where Do We Go? // Economic Policy. – 2003. №18. – P. 123-170.
  • Guiso, L., Jappelli, T., Terlizzese, D. Income risk, borrowing constraints, and portfolio choice // American Economic Review. – 1996. №86 (1). – P. 158-172.
  • Haliassos, M. and Bertaut, C. C. Why do so few hold stocks? // Economic Journal. – 1995. № 105. – P. 1110-1129.
  • Hui, W., Hanna, S. Does risk tolerance decrease with age? // Financial Counseling and Planning. – 1997. № 8 (2). – P. 27-31.
  • Kover, A. Okay, women really could use special advice about investing // Fortune. – 1999. № 139. – P. 129-32.
  • Leuermann, A. Essays on Risk Preferences and Behavioral Finance // Inaugural-Dissertation zur Erlangung der Wurde eines ¨Doktors der Wirtschaftswissenschaften an der Fakultat f¨ ur Wirtschafts- und Sozialwissenschaften der¨. – Ruprecht-Karls-Universitat Heidelberg. 2012: http://archiv.ub.uni-heidelberg.de/volltextserver/14388/1/THESIS.pdf (20.11.2015)
  • Lewellen, W., Lease, R. and Schlarbaum, G. Patterns of investment strategy and behavior among individual investors // Journal of Business. – 1977. №50. – P. 296-333.
  • Mankiw, G. N. and Zeldes, S. The consumption of stockholders and nonstockholders // Journal of Financial Economics. – 1991. №29. – P. 97-112.
  • Morin, R.A., Suarez, A.E. Risk aversion revisited // The Journal of Finance. – 1983. №38. – P. 1201-1216.
  • Schooley, D. K. and Worden, D. D. Investors’ Asset allocations versus life-cycle Funds // Financial Analysts Journal. – 1999. № 5. – P. 37-43.
  • Wang, H., Hanna, S. D. Does risk tolerance decrease with age? // Financial Coun-seling and Planning. – 1997. №8 (2). – P. 27-31.
  • Yao, R., Hanna, S. D., Lindamood, S. Changes in financial risk tolerance, 1983-2001 // Fi-nancial Services Review. – 2004. №13 (4). – P. 249-266.
  • Yao, R., Sharpe, L.D. and F. Wang. Decomposing the age effect on risk tolerance // The Journal of Socio-Economics. – 2011. №40. – P. 879- 887.
  • Zhong, L. X., Xiao, J. J.. Determinants of family bond and stock holdings // Financial Counseling and Planning. – 1995. №6. – P. 107-114.
There are 28 citations in total.

Details

Primary Language English
Journal Section Research Article
Authors

Kamalbek Karymshakov

Raziya Abdieva

Burulcha Sulaimanova This is me

Publication Date May 1, 2016
Submission Date January 1, 2016
Published in Issue Year 2016 Issue: 69

Cite

APA Karymshakov, K., Abdieva, R., & Sulaimanova, B. (2016). DETERMINANTS OF RISK TOLERANCE: EMPIRICAL EVIDENCE FROM KYRGYZSTAN. Reforma, 1(69), 54-61.