Individual financial risk tolerance and the global financial crisis

We investigate individual investors' tolerance towards financial risk by focusing on changes associated with the global financial crisis (GFC) of 2007-2009. Financial risk tolerance (FRT) is analysed longitudinally controlling for demographic, socio-economic and regional variations. In absolute terms, the change in FRT is small and contrasts with a popular view that risk tolerance is an elastic psychological state overly influenced by the pervading market conditions. Even in the presence of significant financial events, FRT tends to be a reasonably stable attribute in the shorter term but possibly influenced and reshaped by events more gradually over time.