The Grable and Lytton risk-tolerance scale
A 15-year retrospective
DOI:
https://doi.org/10.61190/fsr.v24i2.3240Keywords:
Risk tolerance, Risk, Risk scale, Risk scoring, Risk assessmentAbstract
Over a decade ago, Grable and Lytton (1999) developed, tested, and published a financial risk-tolerance scale in Financial Services Review that has since been widely used by consumers, financial advisers, and researchers to evaluate a person’s willingness to engage in a risky financial behavior. Analysis of data (n = 160,279) spanning the timeframe 2007 to 2013 provides evidence that the risk-tolerance scale’s reliability and validity have remained robust since the scale was first developed. The scale’s estimated Cronbach’s α was 0.77 during this time period. Consistent with the literature, high scale scores (representing a greater willingness to take risks) were found to be associated with equity ownership and negatively related to cash and bond holdings.
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