Experience wears the trousers: exploring gender and attitude to financial risk

Are men more tolerant of investment risk than women, and if so, why? In this paper we examine gender differences in attitudes to financial risk using a very large database of questionnaires completed in the context of real investment decisions. We find that men are more financially risk tolerant than women, but this difference cannot be explained by differences in age, employment patterns or by the effect of being in- versus out-of-work. We do, however, find that previous investment experience plays a significant explanatory role. We also observe that, following discussion with a financial advisor, the riskiness of the investment products selected by women are modified to a greater extent from their revealed risk preferences than those of men. We also find that where the risk tolerances of wives and husbands differ when they visit an advisor together, the preferences of the man have a stronger effect on the finally selected joint product when the wife is more risk tolerant than her husband, where she has a lower status job, or where she has less financial experience. Our research provides new evidence on the reasons why women take less financial risk than men and on the outcomes that result when men and women interact in a decision-making process.