The Development of a Risk Assessment Instrument
DOI:
https://doi.org/10.61190/fsr.v12i3.4768Keywords:
Risk tolerance, Risk assessment, Validity, Portfolio choiceAbstract
The purrpose of this Paper is to offer empirical evidence regarding the validity of a 13-item financial risk tolerance assessment instrument originally published by Grable and Lytton (1999) in this Journal. Bivariate and multivariate analyses were used to evaluate data from a sample of individuals who reportecl both having investment assets and making their own investment decisions. The analysis indicated that responses to the 13-item instrument were correlated with porfolio asset ownership as explained by Modern Portfolio Theory. These findings offer support for the concurrent validity (i.e., one form of criterion-related validity) and the construct validity of the assessment instrument. The paper concludes with the recommendation for futher study, such as using the instrument in a longitudinal study to ascertain predictive validity.
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