Subjective Risk Tolerance of South African Investors

In general, the amount of risk an individual is willing to tolerate can be influenced by demographic factors. However, needs for research arise as to whether demographic factors influence the amount of risk investors in South Africa are willing to tolerate. The survey was conducted in 2017 and all South African investors were included in the sample frame. For this study, a sample of 800 was collected and used. Multinomial regression was used to indicate whether there were more than two factors that can influence the four risk tolerance levels of South African investors. The study suggested that gender is a determining factor in the risk tolerance of individuals. African investors were more likely to take the substantial financial risk. Age was also a determining factor of risk tolerance which follows the assumptions of the investor lifecycle where younger investors are more risk tolerant. The study furthermore found that higher annual income attracts more risk-taking while lower-income attracts more risk averseness in individuals. It was lastly observed that married individuals and those that are no longer married will be more likely to be risk-averse. This study makes a significant contribution in profiling investors risk tolerance according to their demographic factors whereby financial institutions can offer more tailored investment options

Risk Tolerance: The Influence of Gender and Life Satisfaction

Abstract: Financial managers base an investor’s risk profile on their demographics and level of risk investors are willing to tolerate. Risk tolerance is often influenced by the different levels of life satisfaction that an investor experience and may differ based on the demographic composition of that investor. Demographic variables such as gender can differentiate between investors level of life satisfaction, which can ultimately affect investment decisions. As a result, the degree of life satisfaction can affect investment decisions by manipulating the level of risk that investors are willing to tolerate. Male and female investors can be categorised into different risk tolerance levels based on their satisfaction with life status. The aim of this study is to determine the risk tolerance level of male and female investors considering their level of life satisfaction. The results of this study indicated that the more unsatisfied investors are with their lives the less likely they will be to take on high-risk investments. Therefore, low life satisfaction is accompanied by a low-risk tolerance level. Male investors had higher life satisfaction compared to female investors. Female investors were only willing to tolerate high risk when experiencing extremely low life satisfaction or extremely high life satisfaction stages

Investment, Exchange Rate and Exports Nexus within the South African Automotive Industry

The automotive industry is one of the South African industries that contribute to the manufacturing output and exports and plays important to the country’s economic performance. However, the export volume from this industry depends on various economic factors that include foreign direct investment, domestic investment and exchange rate volatility. The current study aims to determine empirically these three variables on the export volume in the South African automotive industry. To achieve this objective, the authors applied the autoregressive distributed lag (ARDL) model, ECM and causality test on quarterly time series data from 2008 to 2021. The study findings reveal that in the long run, domestic investment has a dominant positive effect on exports from the automotive industry. However, while both domestic investment and exchange rate are inversely related to the export in the short run, foreign direct investment is positively significant to increase export levels. The study recommends, based on these findings, the implementation of strategies that enhance growth in domestic investment and cautious management of foreign direct investment as the latter is more effective in the short run. Additionally, the monetary policymakers should, in each policy introduced and implemented, aim for the stability of the domestic currency and its effect on exports, especially in the automotive industry.

The Responsiveness of Liquid Fuel Price towards COVID-19 and Exchange Rate Fluctuations

The petrol price plays an important role in all types of business and economic activities, especially in South Africa. The outbreak of the COVID-19 pandemic and the volatility of the exchange rate are some of the current challenges in the South African economy and these factors might have significant implications on domestic petrol fuel prices. In the last two years, the petrol price has experienced a drastic increase in the South African commodity market. The current study investigated the effect of the COVID-19 pandemic and exchange rate fluctuations on petrol prices in South Africa for the period between March 2020 and June 2022. The autoregressive distributed lag (ARDL) model was employed to establish the long-run and short-run relationship between COVID-19 new infections, exchange rate and petrol price in South Africa. The result revealed that both exchange rate and COVID-19 infections negatively influence the petrol price in the long run. However, in the short-run exchange rate has a positive impact on petrol price while the latter is negatively affected by increases in COVID-19 new cases of infection. To maintain a steady state of petrol prices and reduce the impact of petrol price fluctuations, the study recommends the implementation of monetary policies that strengthen the domestic currency accompanied by social awareness programmes on COVID-19 management

Country Risk Effects and Government Domestic Debt Nexus in South Africa

Country risk rating is one of the factors that determine the stability of a given country’s economy and the government's access to both domestic and foreign loans. This paper aimed at assessing the relationship that exists between country risk rating and the South African government's access to domestic debts or loans. Monthly data from January 2008 to December 2019 was investigated using the ARDL bounds testing approach and the error correction model (ECM). The findings of this paper indicated that all country risk components (economic, financial and political) have a significant long-run effect on government domestic debt. While economic and financial risk scores have a positive effect on government debts, an inverse relationship was found between political risk and government debt. These results imply that in order to be independent of foreign debt which comes with terms and conditions; policymakers and the South African government leaders should strive to sustain the stability of the economy and the country’s financial conditions

Income and Subjective Financial Well-Being as Determining Factors of Life Satisfaction

The purpose of the investment is to improve the current level of life satisfaction by achieving investment goals. Investors tend to attain high levels of life satisfaction when their investment goals are achieved and lower levels of life satisfaction when goals are far from achievement. The idiosyncratic characteristics of an individual may often hamper the achievement of investment goals and ultimately influence the level of life satisfaction. These characteristics can either contribute towards low life satisfaction or high life satisfaction. Income and the subjective financial well-being play a determining role in whether an investor has a positive or negative life satisfaction. Hence, the aim of this study was to determine whether income and subjective financial well-being have an influence on the life satisfaction of investors. The results of this study reveal that a strong relationship exists between income, financial well-being, and life satisfaction. Investors who perceived themselves, to have high financial well-being were more likely to have high life satisfaction. On the contrary, investors with low perceived financial well-being were more likely to have low life satisfaction. Similar results were observed for income and life satisfaction since a positive relationship was also found

Analysing the Factors Affecting the Long-term Investment Intention of Investors

The intention of investors to invest over a long term is generally aimed toward stable returns and low liquidity. The framework of this article looks at the theoretical concepts, investor characteristics and investor bias in a risk profile that could influence investors' intent to invest over the long term. Based on traditional investment theory, investment companies acknowledge the impact of risk tolerance on the desired investment horizon of investors. However, traditional risk assessments are limited since they omit variables like personality measures and behavioural finance biases which could affect an investor’s long-term investment intentions. The unfavourable results might be less accurate investor profiles and an investment portfolio not meeting the required return objective. This study included a sample size of 593 private investors. The results indicated that personality traits (extraversion, openness to experience), risk tolerance, and behavioural biases (overconfidence bias) significantly influence long-term investment intentions. By incorporating the above-mentioned factors, financial planners and institutions can more accurately profile their clients and offer financial products that are more suitable for the investor's needs

Fiscal and Monetary Policies Interactions in Nigeria and South Africa: Dynamic Stochastic General Equilibrium Approach

The interaction between fiscal and monetary policies in achieving macroeconomic goals has been a subject of debate, particularly on whether they complement or substitute each other. This issue arises when both policy authorities are independent of each other. This study aims to revisit the interaction of fiscal and monetary policies in Nigeria and South Africa using a dynamic stochastic general equilibrium model (DSGE) and calibration technique. The model consists of 20 equations that illustrate the behaviour of endogenous variables. The parameters are obtained from relevant DSGE literature and economic intuitions about the two economies. The findings reveal that fiscal and monetary policy variables interact in both economies. Inflation responds to fiscal policy shocks such as government spending, revenue and borrowing shocks. Monetary authorities’ decisions such as interest rates and inflation also affect fiscal policy variables. However, the performance of monetary and fiscal policy variables is better in South Africa than in Nigeria. The study recommends closer coordination between the monetary and fiscal authorities in both economies to resolve policy design and implementation issues. Government monitoring and assessment units should also be strengthened to track the implementation and delivery of policies decided upon at coordination meetings

Modelling Factors Influencing Bank Customers’ Readiness for Artificial Intelligent Banking Products

In the era of globalisation and technological development, artificial intelligence (AI) plays a significant role in financial activities and services. AI in financial technology has a clear potential to accelerate the financial industry's transformation by offering excellent value to customers by providing tailor-made products and services, thus improving customer experience. The paper aims to model the factors influencing bank customers' readiness for artificially intelligent banking products within the South African banking sector. Data were collected from 346 banking customers within South Africa. The study results revealed that demographic and socio-cultural variables influence the readiness for artificially intelligent banking products. Behavioural finance biases also influence bank customers' readiness for artificially intelligent banking products. Furthermore, the study also found that customers' readiness for artificial intelligent banking products is faced with the limitation of the inaccessibility to technological tools in rural areas. Consequently, policies that can improve infrastructure and enable rural citizens to cope with advanced technology can improve bank customers' readiness for artificially intelligent banking products in South Africa

Psychological and Behavioural Drivers of Short-Term Investment Intentions

Analysing the factors that influence the short-term investment intentions of investors is critical for investment institutions. If investment institutions are informed about these factors they can create a framework to more accurately profile their clients to provide clients with the desired liquidity, maturity dates and desired risk and return expectations. Risk tolerance is one of the elements that has been used over time to profile investors, however, this paper found that other factors should also be included. Therefore, this article aimed to determine what drives investors’ short-term investment intentions following a more sociological and behavioural approach by including investor personality traits, behavioural finance biases and investors’ risk tolerance behaviour. Secondary data was obtained from a private investment firm surveying private investors in South Africa. Male investors were also more likely to invest in the short-term compared to female investors. Several personality traits, risk tolerance and a single behavioural finance bias were found to influence investor intentions to invest in the short-term. It is therefore recommended to portfolio management companies that several sociological and behavioural variables do explain whether investors will be willing to invest in short-term or more long-term investment portfolios