Gender differences in optimism, psychological responses to loss and attitudes towards risk

43 Pages Posted: 12 Oct 2020 Last revised: 30 Apr 2021

Date Written: September 23, 2020

Abstract

Systematic differences in the attitudes of men and women toward risk is well established and has been shown to contribute substantially to gender-specific outcomes within labour markets and financial markets. In this paper, we explore some of the underlying behavioural characteristics that underlie this difference. Our starting point is that risk assessments can be thought of, in general terms, to combine beliefs about the probability of negative outcomes occurring with a subjective valuation of how painful that negative outcome would be. Exploiting large-scale panel data from the UK we find that financial optimism and the intensity of psychological reactions to monetary loss has a substantial effect on risk attitudes. We also find strong evidence that women are less optimistic and are more sensitive to monetary loss than men, with these differences explaining a significant proportion of the parallel gender difference in willingness to take risks.

Keywords: Gender, Risk Preferences, Loss Aversion, Optimism, Pessimism, Emotionality

JEL Classification: D90, D91

Suggested Citation

Dawson, Chris, Gender differences in optimism, psychological responses to loss and attitudes towards risk (September 23, 2020). Available at SSRN: https://ssrn.com/abstract=3697954 or http://dx.doi.org/10.2139/ssrn.3697954

Chris Dawson (Contact Author)

University of Bath ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

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