Brad Barber, Gallagher
Professor of Finance at the UC Davis GSM, is an authority on
investor psychology, and has done extensive research on
gender-related overconfidence in stock trading. In this blog, he
discusses gender differences in investing and provides
recommendations to the financial advisory industry to adjust
their services to appeal to the growing number of female
investors.
Why are men more willing to take risks when it comes to
investing? Empirical observations conclude that men have a
greater appetite for risk. Studies on investor behavior indicate
that men are more tolerant of risk than women. For example,
studies indicate men allocate a greater proportion of their
investment portfolio to stocks rather than bonds. What-is-more,
the stocks men choose tend to be riskier (more volatile with
greater market risk). All of this suggests that men are more
comfortable taking on higher risk. We do not yet understand
whether these differences in risk appetite between the genders
can be traced to nature or nurture. Are women innately more
cautious than men or do environmental factors govern these
differences. This question remains an area of ongoing research,
and, though the jury is still out, I suspect both nature and
nurture are important factors.
Gender Differences in Investing:
Shifting the Financial Services Industry
Why are men more willing to take risks when it comes to investing? Empirical observations conclude that men have a greater appetite for risk. Studies on investor behavior indicate that men are more tolerant of risk than women. For example, studies indicate men allocate a greater proportion of their investment portfolio to stocks rather than bonds. What-is-more, the stocks men choose tend to be riskier (more volatile with greater market risk). All of this suggests that men are more comfortable taking on higher risk. We do not yet understand whether these differences in risk appetite between the genders can be traced to nature or nurture. Are women innately more cautious than men or do environmental factors govern these differences. This question remains an area of ongoing research, and, though the jury is still out, I suspect both nature and nurture are important factors.
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