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

Journal of Behavioral Finance, Vol. 4, No. 1, pp. 33-40, 2004

25 Pages Posted: 25 Jul 2006  

James Felton

Central Michigan University - Department of Finance and Law

Bryan Gibson

Department of Psychology

David M. Sanbonmatsu

University of Utah - Department of Psychology

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

Suggested Citation

Felton, James and Gibson, Bryan and Sanbonmatsu, David M., Preference for Risk in Investing as a Function of Trait Optimism and Gender. Journal of Behavioral Finance, Vol. 4, No. 1, pp. 33-40, 2004. Available at SSRN: https://ssrn.com/abstract=918502

James Felton (Contact Author)

Central Michigan University - Department of Finance and Law ( email )

332 Sloan Hall
Mount Pleasant, MI 48859
989-774-3269 (Phone)
989-774-6456 (Fax)

Bryan Gibson

Department of Psychology ( email )

Mt. Pleasant, MI
United States
989-774-4404 (Phone)

David M. Sanbonmatsu

University of Utah - Department of Psychology ( email )

702 Social And Behavioral Science Building
380 South 1530 East, Room 502
Salt Lake City, UT 84112 -025
United States
(801) 581-8505 (Phone)
(801) 581-8505 (Fax)

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