The aims of this study were to determine whether financial knowledge is related to risk-taking behavior after controlling for a financial decision-maker’s degree of risk aversion and risk tolerance and to identify the variables that are most important when describing the amount of portfolio risk taken at the household level. It was determined that financial knowledge is positively related to the amount of risk taken by financial decision-makers in their portfolios. Additionally, financial knowledge was found to be inversely related to risk aversion but positively associated with risk tolerance. It was further determined that risk tolerance has the greatest effect in describing portfolio risk. Financial knowledge ranked second in importance, whereas, risk aversion was the least important in describing portfolio risk.
