The Impact of Gender Differences in Financial Risk Aversion

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School of Business | Bachelor's thesis
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Date

2024

Department

Taloustieteen laitos

Major/Subject

Mcode

Degree programme

Taloustiede

Language

en

Pages

26

Series

Abstract

Women have been found to be more risk averse on average compared to men. As finance theory has established that riskier assets generate higher expected returns, it is interesting to examine the effect of risk aversion on in-vestment behavior as it may give insight into lower wealth levels of women compared to men. This thesis aims to provide an understanding of the gender differences in financial risk aversion and their impact in divergent investment behavior between genders. Studies on gender differences in financial risk aversion found mostly consistent results on women being more financially risk averse ccompared to men. Field studies on asset allocations between genders as well as experimental studies on artificial investment decisions found that women chose to invest less in risky assets such as stocks and bonds compared to men. On average, women invested from 2.8 to 6.3 percentage points less of their assets to risky investments compared to men in studies across Finland, US and Italy. One of the field studies found that the magnitude of the gender difference was found to be similar to a college degree and approximately 60% of having a master’s degree or higher level of education. Controlling for risk preferences explained some of the effect of gender in investing, illustrating that risk preferences contributed to the differences in investment behavior.

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Thesis advisor

Terviö, Marko

Keywords

gender, risk aversion, investment behavior, wealth gap

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https://urn.fi/URN:NBN:fi:aalto-202410276903

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[kand] Kauppakorkeakoulu / BIZ