Market Volatility and Financial Satisfaction: The Role of Financial Self-Efficacy

ABSTRACT This study investigates the role of financial self-efficacy (FSE) in moderating the relationship between market volatility and financial satisfaction within a sample of 3,405 adults 50 years old and over from the Health and Retirement Study. Results revealed that market volatility had no statistically significant effect with financial satisfaction for those with moderate or high FSE, but market volatility did have a negative effect for those with low FSE. Results suggest that FSE is an important predictor of financial satisfaction amidst market volatility and should be considered when establishing an appropriate asset allocation for client portfolios.

[1]  Sherman D. Hanna,et al.  Factors Related to Risk Tolerance , 1996 .

[2]  John E. Grable,et al.  An Exploratory Framework of the Determinants of Financial Satisfaction , 2004 .

[3]  Chuanyi Tang,et al.  The ant and the grasshopper revisited: The present psychological benefits of saving and future oriented financial behaviors , 2012 .

[4]  R. Larsen,et al.  The Satisfaction with Life Scale , 1985, Journal of personality assessment.

[5]  Richard E. Lucas,et al.  Subjective Weil-Being: Three Decades of Progress , 2004 .

[6]  A. Bandura.  Social cognitive theory: an agentic perspective. , 1999, Annual review of psychology.

[7]  A. Curl,et al.  Do Market Returns Influence Risk Tolerance? Evidence from Panel Data , 2011 .

[8]  R. Thaler,et al.  Anomalies: Risk Aversion , 2001 .

[9]  Yang Yang.  Social Inequalities in Happiness in the United States, 1972 to 2004: An Age-Period-Cohort Analysis , 2008 .

[10]  T. Tran,et al.  Health, stress, psychological resources, and subjective well-being among older blacks. , 1991, Psychology and aging.

[11]  Daniel Kahneman,et al.  Availability: A heuristic for judging frequency and probability , 1973 .

[12]  A. Spiro,et al.  Change in life satisfaction during adulthood: findings from the veterans affairs normative aging study. , 2005, Journal of personality and social psychology.

[13]  Marc L. Ross,et al.  Individual Investor Perceptions and Behavior during the Financial Crisis , 2013 .

[14]  J Rodin,et al.  A longitudinal study of change in domain-specific self-efficacy among older adults. , 1996, The journals of gerontology. Series B, Psychological sciences and social sciences.

[15]  A. Clark,et al.  Relative Income, Happiness and Utility: An Explanation for the Easterlin Paradox and Other Puzzles , 2007 .

[16]  Miles S. Kimball,et al.  Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey , 1995 .

[17]  C. Kalenkoski,et al.  Public reaction to stock market volatility: evidence from the ATUS , 2016 .

[18]  M. Pinquart,et al.  Influences of socioeconomic status, social network, and competence on subjective well-being in later life: a meta-analysis. , 2000, Psychology and aging.

[19]  Gerhard Van de Venter,et al.  Financial risk tolerance: An analysis of unexplored factors , 2013 .

[20]  A. Shleifer,et al.  Expectations of Returns and Expected Returns , 2013 .

[21]  Claudia R. Sahm,et al.  How Much Does Risk Tolerance Change? , 2007, The quarterly journal of finance.

[22]  John E. Grable,et al.  Investor Risk Tolerance: Testing The Efficacy Of Demographics As Differentiating and Classifying Factors , 1998 .

[23]  A. Bandura.  Social cognitive theory of self-regulation☆ , 1991 .

[24]  N. Steverink,et al.  The personal experience of aging, individual resources, and subjective well-being. , 2001, The journals of gerontology. Series B, Psychological sciences and social sciences.

[25]  Lisa Farrell,et al.  The significance of financial self-efficacy in explaining women’s personal finance behaviour , 2016 .

[26]  A. Bandura.  Self-Efficacy: The Exercise of Control , 1997, Journal of Cognitive Psychotherapy.