A Systematic Literature Review on Factors Affecting Financial Risk Tolerance

Abstract

Financial risk tolerance is a crucial determinant of investment behaviour, yet its underlying factors remain multifaceted and complex. This review paper investigates the interplay between biopsychosocial factors and financial risk tolerance, aiming to clarify the relationship shaping individuals' propensity for risk in financial decision-making. Biological factors, encompassing genetic predispositions and neurological processes, influence risk perception and decision-making. Recent advancements in neuroscience have highlighted the role of brain structures such as the amygdala and prefrontal cortex in assessing risk, shedding light on how individual differences in neural functioning contribute to diverse risk-taking behaviors.

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