Gender Differences in Risk Taking

Abstract

This report is a compilation of 16 economic papers that study the topic of gender differences for risk taking. The level of risk taking while making investment decisions differs from one individual to another, based on various factors. The studies analyzed in these journal papers are summarized in the survey of literature section of this paper. Moreover, two papers have been selected to focus on the details discussed about risk taking differences amongst the two genders. A summary of these two papers has been formed in the extension section of this paper. The first journal paper is written by Charness and Gneezy (2012) which attempts to answer the question of whether the stereotype about females being more financially risk averse, holds true. The paper discusses various studies and identifies and underlying difference in the investment choices made by females as compared to males. Secondly, the article by Mittal and Vyas (2011), is discussed in detail. This article emphasizes on the psychological reasons behind the gender differences in males and females while making risky decisions. The conclusion formed from both articles is consistent, which is in conjunction with the stereotype that women are in fact more risk averse than men.

Survey of literature

Of the decisions people make in their life, many involve risk. Risk is referred to activities in which the individual chooses an option that carries the possibility of negative outcomes (Cox and Olsen, 2001). The response to risky situations differs from one individual to another.Recent studies and research are being conducted to investigate the reasons that caused these disparities.It has been highlighted through miscellaneous studies and experiments that gender is indeed a contributing factor for the difference in the decision making that involve risk. A study by a major brokerage firm pointed out that after the factors of age and income, gender is the most important factor that affects investment choices (Bajtelsmit and Bernasek, 1996).In general, these differences between the two genders are noticed in daily life decisions, such assmoking, drinking, speed limitand wearing seat belt while driving(Hersch 1996).Similarly, differences in gender preferences of risk were also noticed in various aspects in the business field such as investment, consumption and in the labor market (Blau& Kahn, 2000).

Among different studies,a common conclusionsupport the stereotype that women tend to be more risk averse than men in both daily life decisions and business decisions. In his study over 18,000 individuals, Hersch (1996) found out that on average men make riskier decisions in their daily life than women do. The same conclusion was earlierdrawn by Kristiansen in 1990 andby Svenson in 1978.Likewise, in financial decisions, significant body of research reveals that males show greater risk taking than females(Croson