Financial Risk Tolerance

15-Year Retrospective Risk Paper to be Published

A retrospective review of the Grable and Lytton Risk Scale will be published later this year in Financial Services Review, one of the premier academic financial planning journals. Here is the paper’s abstract:

“Over a decade ago, Grable and Lytton (1999) developed, tested, and published a financial risk-tolerance scale in Financial Services Review that has since been widely used by consumers, financial advisers, and researchers to evaluate a person’s willingness to engage in a risky financial behavior. Analysis of data (n = 160,279) spanning the timeframe 2007 to 2013 provides evidence that the risk-tolerance scale’s reliability and validity have remained robust since the scale was first developed. The scale’s estimated Cronbach’s alpha was .77 during this time period. Consistent with the literature, high scale scores (representing a greater willingness to take risks) were found to be associated with equity ownership and negatively related to cash and bond holdings.”

The scale can be accessed at the following site: