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Are risk preferences explaining gender differences in investment behavior?

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  • Holden, Stein T.
  • Tilahun, Mesfin

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 of but not all of the gender differences in investment behavior.

Suggested Citation

  • Holden, Stein T. & Tilahun, Mesfin, 2022. "Are risk preferences explaining gender differences in investment behavior?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 101(C).
    • Handle: RePEc:eee:soceco:v:101:y:2022:i:c:s2214804322001203
    DOI: 10.1016/j.socec.2022.101949
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    Cited by:

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    3. Holden, Stein T. & Tilahun, Mesfin, 2023. "Can climate shocks make vulnerable subjects more willing to take risks?," CLTS Working Papers 3/23, Norwegian University of Life Sciences, Centre for Land Tenure Studies.

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    More about this item

    Keywords

    Gender difference; Individual investment; Risk preferences; Prospect theory; Cohen’s d; Northern Ethiopia;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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