Identity, Overconfidence, and Investment Decisions

Abstract

Why are men more risk tolerant than women, and why do they invest more than women? I test whether identity stereotypes help explain this heterogeneity. I manipulate identity in a controlled environment by priming its salience to subjects. Men whose identity is primed take on more risk, and invest more often and more money than controls. The salience of male identity increases men's beliefs about experiencing good outcomes in a game of chance. Inducing overconfidence similarly makes men take on more risk and invest more. The effects are stronger for older cohorts of men, consistent with the notion that gender-identity stereotypes have become less stark over the last decades.

Keywords: Gender Identity, Stereotypes, Experimental Economics, Heterogeneous Beliefs, Individual Investors

JEL Classification: D81, G01, G11, J16, Z13