Investor Traits and Risk Tolerance Post-COVID-19: The Moderating Role of Financial Advice in Pakistan
Keywords:
Investor Behavior, Risk Tolerance, Financial Advice, Ordered Logistics, Regression, Covid-19Abstract
Purpose
This study examines the impact of personal characteristics (age, gender, education, market exposure, and marital status) on individual investors' risk tolerance in Pakistan post-COVID-19. Additionally, the moderating role of financial advice in influencing this relationship is explored.
Methodology
A quantitative research design was employed, with data collected via an online survey of 382 retail investors in Pakistan. The data was analyzed using the generalized ordered logistic regression model to test the relationship between personal characteristics and risk tolerance, moderated by financial advice.
Findings:
Results indicate that gender, age, education, and market exposure are all good predictors of risk tolerance. Financial advice is a significant moderator; it significantly enhances the risk tolerance for groups that are generally more conservative - women and older respondents.
Implications
The findings have several implications that are useful for both practicing financial advisors and policymakers. Advisors can have demographic-specific guidance for their clients, while policymakers can design focused financial literacy programs. Individual investors could make better choices on risk exposure, knowing the influence of personal traits and how professional advice works.
Novelty
This is a new integration of the Life Cycle Hypothesis and financial advice as a moderating variable, leading to a better theoretical understanding of investor behavior. The results offer new insights into how personal characteristics and external guidance shape risk tolerance in emerging markets such as Pakistan.
Future Research
Future studies should try to find more personal characteristics, including personality and cultural variables, and analyze how changes in life events or deviations in income may affect risk tolerance. Other fruitful areas of possible research could include an investigation into the impact that digital financial advice services may have on investor behavior.
