Does Gender Affect Investors' Appetite for Risk?: Evidence from Peer-to-Peer Lending
AbstractThis study investigates the role of gender in financial risk-taking. Specifically, I ask whether female investors tend to fund less risky investment projects than males. To answer this question, I use real-life investment data collected at the largest German market for peer-to-peer lending. Investors' utility is assumed to be a function of the projects expected return and its standard deviation, whereas standard deviation serves as a measure of risk. Gender differences regarding the responses to projects' risk are tested by estimating a random parameter regression model that allows for variation of risk preferences across investors. Estimation results provide no evidence of gender differences in investors' risk propensity: On average, male and female investors respond similarly to the changes in the standard deviation of expected return. Moreover, no differences between male and female investors are found with respect to other characteristics of projects that may serve as a proxy for projects' risk. Significant gender differences in investors' tastes are found only with respect to preferred investment duration, purpose of investment project and borrowers' age.
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Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1125.
Length: 30 p.
Date of creation: 2011
Date of revision:
gender; investment choice; risk preferences;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-24 (All new papers)
- NEP-CBE-2011-05-24 (Cognitive & Behavioural Economics)
- NEP-PPM-2011-05-24 (Project, Program & Portfolio Management)
- NEP-UPT-2011-05-24 (Utility Models & Prospect Theory)
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