Rosie Cao (Newcastle University), 13 Nov 2017, 4:30pm, NUBS 1.14

Speaker: Rosie Cao, Newcastle University 

Title: From Language to Financial Risk Tolerance through the Channels of Risk Perception and Risk Attitude

Date & Time: 13 Nov 2017 (Monday), 4:30-5:45 pm

Venue:  Newcastle University Business School, room 1.14




Financial risk tolerance (FRT) is one of the most heavily researched concepts within the financial and economic areas. Many research have been conducted to identify factors that influence individual FRT with the aim of better understanding the investors’ risk profile, and hence, their decision making under risk and uncertainty. This study is the first to propose language as an alternative factor that accounts for differences in individual FRT level. Such linguistic effect is projected based on the role of language in human’s time perception. An additional interest in this context is to justify the two mechanisms: risk perception (RP) and risk attitude (RAtt), through which the effect of language on FRT occurs. The investigation employs a bespoke questionnaire survey on 1,889 respondents from five diverse cultural and linguistic milieus: the US, the UK, China, Singapore, and Vietnam. According to the mosaic model-based analysis, the results indicate that with the same investment option, weak-FTR language (e.g. Chinese) speaking individuals are more willing to engage with the investment by offering higher price (more risk tolerant) than strong-FTR language (e.g. English and Vietnamese) speaking individuals. The cross-linguistic difference in FRT can be explained by both cross-linguistic differences in risk perception and risk attitude. In essence, individuals speaking weak-FTR languages perceive the same investment as less risky and additionally, they dislike risk less, than do individuals speaking strong-FTR languages. Nonetheless, if those weak-FTR language speakers can fluently speak at least one strong-FTR language, their risk perceptions will significantly increase and their risk attitudes will reduce. As a result, those multilinguals are less risk tolerant comparing to weak-FTR language monolinguals.

Last modified: Tue, 17 Oct 2017 15:12:39 BST