Preference for Risk in Investing as a Function of Trait Optimism and Gender

Abstract

This research examines the role of gender and optimism on the riskiness of investment choices of students in a semester long investment contest with both monetary and academic incentives. Data suggest that males make more risky investment choices than females, and that this difference was primarily due to the riskier choices of optimistic males. In addition, males demonstrated greater variability in final portfolio value than did females. Our results suggest that 1) the well documented gender difference in investment strategies of men and women may be due to a specific sub-group of males (i.e., optimists); 2) that optimism may lead to different behavioral tendencies in men and women depending on the domain; and 3) that the benefits of optimism may be restricted to domains in which continued effort and information seeking are likely to lead to desired outcomes.

Keywords: investment, risk, gender, optimism, behavioral

JEL Classification: D81, G11, I21