Article

Theory and Decision

, Volume 60, Issue 2, pp 283-313

First online:

Gender, Financial Risk, and Probability Weights

  • Helga Fehr-DudaAffiliated withInstitute of Economic Research, Swiss Federal Institute of Technology Email author 
  • , Manuele de GennaroAffiliated withInstitute of Economic Research, Swiss Federal Institute of Technology
  • , Renate SchubertAffiliated withInstitute of Economic Research, Swiss Federal Institute of Technology

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Abstract

Women are commonly stereotyped as more risk averse than men in financial decision making. In this paper we examine whether this stereotype reflects gender differences in actual risk-taking behavior by means of a laboratory experiment with monetary incentives. Gender differences in risk taking may be due to differences in valuations of outcomes or in probability weights. The results of our experiment indicate that value functions do not differ significantly between men and women. Men and women differ in their probability weighting schemes, however. In general, women tend to be less sensitive to probability changes. They also tend to underestimate large probabilities of gains more strongly than do men. This effect is particularly pronounced when the decisions are framed in investment terms. As a result, women appear to be more risk averse than men in specific circumstances.

Keywords

gender differences risk aversion financial decision making prospect theory probability weighting function