Women and risk tolerance in an aging world

Women and risk tolerance in an aging world Purpose – Using a very large sample of psychometrically derived risk profiles of adult Australians, the paper aims to explore the linkage between financial risk tolerance and gender. Design/methodology/approach – The key proxy of risk tolerance score (RTS) derives from a 25 question survey devised by Finametrica and used in real client situations. Using multiple regression analysis in which RTS is the dependent variable, the paper tested the importance of gender in explaining cross‐sectional variation, while controlling for a range of demographic characteristics. The impact of gender was further explored through dummy variable enhanced regression analysis constructed to test the increment in each demographic coefficient derived from being female relative to the base case of being male. Findings – The paper documents strong evidence that women differ from men in their attitude to financial risk taking. In general, women are shown to be less risk tolerant than counterpart males, with this differential varying depending on the demographic feature considered. We also find that marital status, number of dependents, age, education, income, combined income, and net assets are significant determinants of risk tolerance in their own right. Originality/value – Given the extent to which women have more conservative risk profiles and the extent to which this conservatism is exacerbated with age (given the longevity advantage of women), one would expect to see asset allocation decisions leading to an overall shift to less risky investment portfolios. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Accounting and Information Management Emerald Publishing

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Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1834-7649
D.O.I.
10.1108/18347641111136427
Publisher site
See Article on Publisher Site

Abstract

Purpose – Using a very large sample of psychometrically derived risk profiles of adult Australians, the paper aims to explore the linkage between financial risk tolerance and gender. Design/methodology/approach – The key proxy of risk tolerance score (RTS) derives from a 25 question survey devised by Finametrica and used in real client situations. Using multiple regression analysis in which RTS is the dependent variable, the paper tested the importance of gender in explaining cross‐sectional variation, while controlling for a range of demographic characteristics. The impact of gender was further explored through dummy variable enhanced regression analysis constructed to test the increment in each demographic coefficient derived from being female relative to the base case of being male. Findings – The paper documents strong evidence that women differ from men in their attitude to financial risk taking. In general, women are shown to be less risk tolerant than counterpart males, with this differential varying depending on the demographic feature considered. We also find that marital status, number of dependents, age, education, income, combined income, and net assets are significant determinants of risk tolerance in their own right. Originality/value – Given the extent to which women have more conservative risk profiles and the extent to which this conservatism is exacerbated with age (given the longevity advantage of women), one would expect to see asset allocation decisions leading to an overall shift to less risky investment portfolios.

Journal

International Journal of Accounting and Information ManagementEmerald Publishing

Published: Jun 7, 2011

Keywords: Financial risk; Gender; Demographics; Portfolio investment

References

  • Do female mutual fund manages manage differently?
    Atkinson, S.M.; Baird, S.B.; Frye, M.B.
  • Individual investor risk aversion and investment portfolio composition
    Cohn, R.A.; Lewellen, W.G.; Lease, R.C.; Schlarbaum, G.G.
  • Financial risk tolerance and additional factors that affect risk taking in everyday money matters
    Grable, J.E.
  • Are women more risk averse
    Jianakoplos, N.A.; Bernasek, A.
  • Decision making, risk and gender: are managers different?
    Johnson, J.; Powell, P.
  • Some direct evidence on the dividend clientele phenomenon
    Lewellen, W.G.; Stanley, K.L.; Lease, R.C.; Schlarbaum, G.G.
  • Risk aversion revisited
    Morin, R.A.; Suarez, A.F.
  • Financial decision‐making: are women really more risk‐averse?
    Schubert, R.; Brown, M.; Gysler, M.; Brachinger, H.W.
  • Risk preference predictions and gender stereotypes
    Siegrist, M.; Cvetkovich, G.; Gutscher, H.

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