Gender Differences in Financial Decisions
(2020) EXTM10 20201Department of Economics
- Abstract
- Investment behavior is strongly affected by the level of risk we are willing to take and to what extent we believe an investment is going to be successful. It has been found in previous experiments that men and women tend to have different risk preferences and beliefs, with dissimilar investment behavior as consequence. In this study risk preferences and beliefs among men and women are elicited with focus on two factors of the risky asset; the gender of the CEO and the level of sustainability and ethics. This is done by investigating the behavior of men and women in a combined investment game and vignette study. The results show that women in general both invest and believe less in assets than men do. Neither the gender of the CEO nor the... (More)
- Investment behavior is strongly affected by the level of risk we are willing to take and to what extent we believe an investment is going to be successful. It has been found in previous experiments that men and women tend to have different risk preferences and beliefs, with dissimilar investment behavior as consequence. In this study risk preferences and beliefs among men and women are elicited with focus on two factors of the risky asset; the gender of the CEO and the level of sustainability and ethics. This is done by investigating the behavior of men and women in a combined investment game and vignette study. The results show that women in general both invest and believe less in assets than men do. Neither the gender of the CEO nor the level of sustainability and ethics change this relationship, but the level of sustainability and ethics is found to affect the investment behavior to similar extent among both men and women. However, women show significantly higher levels of self reported importance of sustainability and ethics which is inconsistent with the shown investment behavior. (Less)
- Popular Abstract
- Men and women have in several settings been found to show different levels of both risk taking and optimism when it comes to investments. But when it comes to the company being invested in, does the risk taking and optimism about the future of the company depend on the gender of the CEO? Does it depend on whether the company is sustainable or not? And does it matter more to one gender than the other?
The fact that men in general tend to take more risks and show higher levels of optimism than women is not least reflected in their behavior when it comes to financial investments. Men are known to not only hold more money than women, but also to invest a larger share of it. These differences play a crucial part in the matter of financial... (More) - Men and women have in several settings been found to show different levels of both risk taking and optimism when it comes to investments. But when it comes to the company being invested in, does the risk taking and optimism about the future of the company depend on the gender of the CEO? Does it depend on whether the company is sustainable or not? And does it matter more to one gender than the other?
The fact that men in general tend to take more risks and show higher levels of optimism than women is not least reflected in their behavior when it comes to financial investments. Men are known to not only hold more money than women, but also to invest a larger share of it. These differences play a crucial part in the matter of financial gender equality, as investing in stocks and funds generally generates a higher payoff than holding money in a bank account. It can also affect which companies gets a larger share of investor's money, should there be a gender difference when it comes the companies being invested in. Real world data shows that companies started by women receive a very small portion of venture capital compared to companies started by men. It can also be seen that women have increased their presence on the financial markets in recent years, and particularly so when looking at investments in sustainable companies. These two factors, the gender of the CEO and the level of sustainability, were investigated scientifically in an experiment where participants were asked to make investments in fictitious companies. The results showed that men in general indeed invest more than women and show higher levels of optimism, in line with the real world data. The gender of the CEO showed to be of no significant importance neither to men nor women, but there were indications that women tend to invest less when the CEO is a woman. Sustainability turned out to be a very important factor to both men and women, who raised their risk taking as well as level of optimism when investing in sustainable companies. The fact that the gender of the CEO had no effect on the investment behavior is great news from an equality perspective, but also raises the inevitable question: why do we see this in the real world? Clearly, there are other factors that need to be investigated to answer this question. From a sustainability point of view, seeing that both men and women value responsible companies gives great hope for the future. By inspiring women to invest more, and increase incentives to invest in sustainable and ethical asset we can move forward into a more sustainable future, both socially and environmentally. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9026081
- author
- Rygård, Lisa LU
- supervisor
- organization
- course
- EXTM10 20201
- year
- 2020
- type
- H2 - Master's Degree (Two Years)
- subject
- keywords
- gender differences, decision making under risk, investment, sustainability, leadership gender
- language
- English
- id
- 9026081
- date added to LUP
- 2021-02-25 12:55:26
- date last changed
- 2021-02-25 12:55:26
@misc{9026081,
abstract = {{Investment behavior is strongly affected by the level of risk we are willing to take and to what extent we believe an investment is going to be successful. It has been found in previous experiments that men and women tend to have different risk preferences and beliefs, with dissimilar investment behavior as consequence. In this study risk preferences and beliefs among men and women are elicited with focus on two factors of the risky asset; the gender of the CEO and the level of sustainability and ethics. This is done by investigating the behavior of men and women in a combined investment game and vignette study. The results show that women in general both invest and believe less in assets than men do. Neither the gender of the CEO nor the level of sustainability and ethics change this relationship, but the level of sustainability and ethics is found to affect the investment behavior to similar extent among both men and women. However, women show significantly higher levels of self reported importance of sustainability and ethics which is inconsistent with the shown investment behavior.}},
author = {{Rygård, Lisa}},
language = {{eng}},
note = {{Student Paper}},
title = {{Gender Differences in Financial Decisions}},
year = {{2020}},
}