Impact of Financial Literacy and Risk Tolerance on Investment Behaviour among College Students: Evidence from Jakhama, Kohima, India

Abstract

The research examined the extent to which financial literacy and risk tolerance influence the investment behavior of college students in Jakhama, Kohima when considered together. Using primary survey data of 415 respondents, the analysis applied logistic and ordered logit models to actual investment participation and hypothetical allocation preferences for a Rs.10,000 windfall to study expressions. The students imparts to a moderate level of financial literacy (mean score = 3.24/5) and risk tolerance (mean = 3.06/5). The financial literacy was only marginally associated with actual investment participation (p = 0.060), whereas it had a significant impact on hypothetical investment preferences (p = 0.008). The risk tolerance hence is the main behavioral driver, which shows the effect of approximately 1.4 times larger than that of literacy. The findings signify that traits of a behavioral and cognitive nature have a greater influence than those of demographic characteristics in determining the investment behavior of youth. This research points to the necessity of more effective financial education programs that not only broaden the conceptual understanding but also encourage the practice of responsible and well-calibrated risk-taking among young adults.