Academic journal article Indian Journal of Positive Psychology

A Correlational Study of Financial Risk Attitudes, Investment Behaviour and Life Satisfaction of Middle Class People

Academic journal article Indian Journal of Positive Psychology

A Correlational Study of Financial Risk Attitudes, Investment Behaviour and Life Satisfaction of Middle Class People

Article excerpt

The citizens of developing India have been increasingly exposed to various investment avenues and risky' ventures in the past few years. It is likely that this exposure has lead to a greater financial risktolerance of the Indian citizens. In India, traditionally, people have been very risk averse andhave been apprehensive of investing in new and risky' ventures. The Indian society'has valued security over a high risk-high return tradeoff. Also, a heavy' negative stigma is associated with gambling and betting. However, the expansion and development of financial markets has made the Indian investor more likely to invest in risky avenues.

Well being is a very fluid trend. It is a complex concept that has many variables like life satisfaction, positive and negative experiences and, different aspects of human functioning ranging from positive relationships, to feelings of competence, to having meaning and purpose in life (Diener, Emmons, Larsen, & Griffin, 1985, Diener et al., 2009). Well-Being is dependent on several external factors such income levels, location of residence, degree of freedom, acceptance and internal factors such as self esteem, perception patterns and belongingness.

Although, previous attempts have been made to determine the relationship between 'willingness to take financial risk' and 'life satisfaction' (Dohmen et al., 2005), we could not find any study that examines the relationship in the traditionally risk-averse society of India, nor could we find any study that provides a comparative examination of this relationship for the public sector employees, private sector employees and the self employed (entrepreneurs).

As previously stated, the financial risk perception of Indians has undergone a change during the past few years. This has translated into a shift in their investment behaviours and patterns. This change has been accentuated by globalisation, investment promotion schemes by the government and private bodies and an increase in income levels. Thus, it becomes essential to perform a descriptive and comparative analysis of investment patterns of Indian investors from various occupational backgrounds.

Through this study, we attempt to establish a relationship between financial risk perception and well-being in the context of the Indian society and undertake a comparative analysis of this relationship amongst the occupational categories of public sector employees, private sector employees and the self employed (entrepreneurs). We also attempt to identify investment patterns amongst the above mentioned categories and subcategories.

Review of literature

In the past years, many studies have attempted to examine the relationship between risk perception, both financial and nonfinancial, and psychological factors such as well-being. However, these were conducted using population samples from other (mostly developed) countries. Hence, due to huge differences in the psychological, social and economic attributes of Indians from those of individuals in developed countries, it becomes essential to examine this relationship in the Indian context.

Financial Risk Perception indicates the attitudes of an individual towards financial risk while life satisfaction is an integral component of wrell-being. Dohmen et al. (2005) demonstrated that willingness to take financial risks was strongly and positively related to satisfaction with life using a sample of 22,000 German nationals. Dohmen, Falk, Huffman, Sunde (2005) showed that people with high satisfaction are more willing to take risks. Daniel Gray (2014) demonstrated that risk aversion was associated with lower levels of financial concerns. However, a positive correlation existed between financial concerns and life satisfaction in the same study. Joo and Grable (2004) showed that there existed an overall positive but indirect relationship between risk tolerance and financials satisfaction. We believe that financial satisfaction is an important component of overall life satisfaction. …

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