Are Risk Preference Explaining Gender Differences in Investment Behavior?

24 Pages Posted: 4 Apr 2022

See all articles by Stein Holden

Stein Holden

Norwegian University of Life Sciences (NMBU)

Mesfin Tilahun

Norwegian University of Life of Sciences

Abstract

We analyze individual investment behavior among 822 young men and women that are members of 111 formal business groups in northern Ethiopia. We collected baseline data and investment data one year later combined with incentivized field experiments to obtain dis-aggregated risk preference data. We find that businesswomen on average invest significantly less at individual-level than businessmen but Cohen’s d values for the gender difference are moderate in size. Women are found to have higher Constant Relative Risk Aversion (CRRA-r) coefficients (more concave utility function), to be more loss averse, but also to be more optimistic in their expectations (lower Prelec 𝛽) than men. Women were also poorer in non-land assets, came from more land-poor parents, and had lower incomes. The gender differences in risk attitudes and baseline endowments could explain some but not all of the gender differences in investment behavior.

Keywords: Gender difference, Individual investment, Risk preferences, Prospect theory, Cohen's d, Northern Ethiopia

Suggested Citation

Holden, Stein and Tilahun, Mesfin, Are Risk Preference Explaining Gender Differences in Investment Behavior?. Available at SSRN: https://ssrn.com/abstract=4074410 or http://dx.doi.org/10.2139/ssrn.4074410

Stein Holden (Contact Author)

Norwegian University of Life Sciences (NMBU) ( email )

As
As
Oslo, Norway, 1432
Norway

Mesfin Tilahun

Norwegian University of Life of Sciences ( email )

Ås, 1430
Norway

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