Impact of financial knowledge and confidence on investment risk tolerance of Egyptian individuals

Abstract

The paper seeks to examine the effect of both subjective and objective financial knowledge on investment risk tolerance of Egyptian individuals. The findings indicate that objective financial knowledge has insignificant impact, but subjective financial knowledge has a positive and significant impact on risk tolerance, especially among people who are young and male individuals. Although results indicate presence of bias in self-assessment of knowledge among Egyptian individuals, it has a weak explanatory power in explaining the risk tolerance. Financial education has positive and significant impact on risk tolerance of investors, but finance work experience has a weak effect. This paper provides investment advisors with practical insights into the behavior of potential investors.