Impact of investors’ demographic, behavior, attitudes and knowledge and skills on their risk tolerance levels in Bangladesh’s emerging capital market

Purpose This paper examines the impact of socio-economic and behavioral factors on determining the risk tolerance level of investors in the Bangladeshi stock market. Design/methodology/approach To measure the effects of socioeconomic factors, investment behavior, attitude and knowledge, a chi-square test analysis, a Bayesian ordinal regression model (with convergence and posterior predictive checks) and a forest plot of regression coefficients were used. Findings The findings reveal that investment attitudes, level of investment, education and risk attitudes are significant predictors of risk tolerance, with positive effects indicated by posterior estimates of 0.72, 1.00, 0.70 and 0.54, respectively, as shown by 95% credible intervals excluding zero. The regressions show a marginal negative relationship between income and risk tolerance, but marital status had no significant effect on risk tolerance. Gender is another factor, with males having a higher risk-taking tendency compared with females. Individuals with such attitudes typically fall into the category of moderate risk tolerance, which suggests a connection between their values, attitude toward long-term operations or active trading and moderate risk inclination. Practical implications Practically, the paper can be used to further the actions of behavioral finance, as it outlines the subject of psychological and behavioral forces in risk-taking activities. This justifies the claim that significantly more effort within the field of financial promotion should be devoted to educating investors and modeling their attitudes rather than focusing solely on the significance of such a demographic variable. Originality/value The study’s originality lies in its multidimensional approach, advanced methodology and counterintuitive findings, challenging traditional risk tolerance models.