On the linkage between financial risk tolerance and risk aversion

Robert Faff, D Mulino, D Chai

Research output: Contribution to journalArticlepeer-review

48 Citations (Scopus)


We explore the linkage between financial risk tolerance (FRT) and risk aversion. To do this, we obtain FRT scores from a psychometrically validated survey and conduct a battery of online lottery choice experiments involving the same nonstudent participants. We contrast: real and hypothetical payoffs, low and high stakes, decisions involving gains and losses, and order effects. Our key finding is that the two approaches to analyzing decision making under uncertainty are strongly aligned. We present evidence that this is particularly the case for the female participants in our sample and when high-stake gambles are employed.
Original languageEnglish
Pages (from-to)1-23
Number of pages23
JournalJournal of Financial Research
Issue number1
Early online date13 Feb 2008
Publication statusPublished - 2008


  • linkage
  • financial risk
  • tolerance
  • risk aversion
  • FRT
  • online lottery choice experiments
  • high-stake gambles

Cite this