The Influence of Financial Literacy, Risk Aversion and Expectations on Retirement Planning and Portfolio Allocation in Malaysia

Nurul Shahnaz  Mahdzan; Amrul Asraf  Mohd-Any; Mun-Kit  Chan

Nurul Shahnaz Mahdzan University of Malaya
Amrul Asraf Mohd-Any University of Malaya
Mun-Kit Chan UOB Malaysia

Keywords: Retirement planning, portfolio allocation, financial literacy, risk aversion, expectations

Abstract

The two objectives of this paper are to examine the effect of financial literacy, risk aversion and expectations on retirement planning; and, to investigate the effect of these antecedents on the retirement portfolio allocation. Data was collected via a self-administered questionnaire from a sample of 270 working individuals in Kuala Lumpur, Malaysia. Logistic and ordered probit regressions were employed to analyse the first and second objective, respectively. The results from the logistic regression indicate that future expectations significantly influence the probability of planning for retirement. Meanwhile, individuals with higher financial literacy and lower risk aversion are more likely to hold risky assets in their retirement portfolios. Subsequently, two-sample t-test and one-way ANOVA tests were conducted to further examine the differences in financial literacy, risk aversion and expectations, across demographic subgroups. The study contributes to the literature by holistically incorporating the behavioural aspects that affect retirement planning and by exploring an uncharted issue of retirement planning—namely, the retirement portfolio allocation.

Author Biographies

Nurul Shahnaz Mahdzan, University of Malaya

Dr. Nurul Shahnaz Ahmad Mahdzan is an Associate Professor at the Department of Finance & Banking, Faculty of Business & Accountancy, University of Malaya, and a Research Associate of the Social Security Research Center (SSRC), University of Malaya. She obtained her PhD from the Nottingham University Business School, United Kingdom, in 2010. She received her Masters of Business Administration (with Distinction) from the University of Malaya, and her Bachelor’s in Business Administration (Summa Cum Laude) from Ohio University, USA. Her research interests are personal finance, saving behaviour and financial attitudes of households. She has a number of published articles in local and international journals in these areas. Prior to her career in academia, she worked in the banking and insurance industry for ten years, where she mainly dealt with customers and their personal finances.

Amrul Asraf Mohd-Any, University of Malaya

MOHD-ANY, Amrul Asraf is a Senior Lecturer in Marketing at the Faculty of Business and Accountancy, University of Malaya, Malaysia. He holds a PhD in Marketing from Nottingham University Business School, The University of Nottingham, UK, and a MSc in International Hospitality Management from University of Strathclyde, Scotland. His research interests lie in the field of services marketing, internet marketing, customer participation and value co-creation. He has published in journals such as Journal of Travel Research and Electronic Markets: The International Journal on Networked Business, among others.

Mun-Kit Chan, UOB Malaysia

CHAN, Mun-Kit is a Project Manager (Vice President) at the Global Markets Department, United Overseas Bank (Malaysia) Berhad. He specializes in project management, business and system supports. Prior to his current placement, he has worked as a Business Analyst at several other investment banks in Malaysia. He obtained his Master of Business Administration from University of Malaya, with a concentration in Finance.

References

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The Influence of Financial Literacy, Risk Aversion and Expectations on Retirement Planning and Portfolio Allocation in Malaysia

Abstract

Author Biographies

References

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