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Gender differences in risky asset behavior: the importance of self-confidence and financial literacy

Author

Listed:
  • Andrej Cupák

    (Research Department, National Bank of Slovakia)

  • Pirmin Fessler

    (Foreign Research Division, Oesterreichische Nationalbank)

  • Alyssa Schneebaum

    (Department of Economics, Vienna University of Economics and Business)

Abstract

Women are less likely than men to hold risky financial assets, a fact that has often been attributed to differences in risk aversion and, more recently, to differences in financial literacy and investor confidence. This paper studies the role of individuals’ confidence in their own financial literacy in explaining the gender gap in investment in risky assets, while controlling for actual financial literacy and a measure of risk aversion. It is the first paper to assess the role of confidence independent of actual financial knowledge for a large set of countries and it is the first to explore the role of confidence by using counterfactual decomposition techniques. Results from our analysis confirm recent findings of modern behavioral finance: confidence is a strong determinant of risky financial behavior and accounts for a large part of the gender gap.

Suggested Citation

  • Andrej Cupák & Pirmin Fessler & Alyssa Schneebaum, 2020. "Gender differences in risky asset behavior: the importance of self-confidence and financial literacy," Department of Economics Working Papers wuwp301, Vienna University of Economics and Business, Department of Economics.
    • Handle: RePEc:wiw:wiwwuw:wuwp301
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    References listed on IDEAS

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    10. Cupák, Andrej & Fessler, Pirmin & Schneebaum, Alyssa & Silgoner, Maria, 2018. "Decomposing gender gaps in financial literacy: New international evidence," Economics Letters, Elsevier, vol. 168(C), pages 102-106.
    11. Halko, Marja-Liisa & Kaustia, Markku & Alanko, Elias, 2012. "The gender effect in risky asset holdings," Journal of Economic Behavior & Organization, Elsevier, vol. 83(1), pages 66-81.
    12. Bannier, Christina E. & Neubert, Milena, 2016. "Gender differences in financial risk taking: The role of financial literacy and risk tolerance," Economics Letters, Elsevier, vol. 145(C), pages 130-135.
    13. Andrej Cupak & Pirmin Fessler & Joanne W. Hsu & Piotr R. Paradowski, 2020. "Confidence, financial literacy and investment in risky assets: Evidence from the Survey of Consumer Finances," Working and Discussion Papers WP 4/2020, Research Department, National Bank of Slovakia.
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    Cited by:

    1. Gintautas Silinskas & Arto K. Ahonen & Terhi‐Anna Wilska, 2023. "School and family environments promote adolescents' financial confidence: Indirect paths to financial literacy skills in Finnish PISA 2018," Journal of Consumer Affairs, Wiley Blackwell, vol. 57(1), pages 593-618, January.
    2. Nave, Juan M. & Oliva, Laura & Toscano, David, 2023. "Financial knowledge and financial behaviour: The moderating role of home ownership," Finance Research Letters, Elsevier, vol. 57(C).
    3. Pavel Ciaian & Andrej Cupak & Pirmin Fessler & d'Artis Kancs, 2022. "Environmental-Social-Governance Preferences and Investments in Crypto-Assets (Pavel Ciaian, Andrej Cupak, Pirmin Fessler, d’Artis Kancs)," Working Papers 243, Oesterreichische Nationalbank (Austrian Central Bank).
    4. Long, Trinh Quang & Hoang, Trang Cam & Simkins, Betty, 2023. "Gender gap in digital literacy across generations: Evidence from Indonesia," Finance Research Letters, Elsevier, vol. 58(PD).
    5. Li, Jingrong & Mi, Xinyu & Zhang, Chenlei & Qin, Yanran, 2024. "Social pension insurance and household risky asset investment: Evidence from China," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 219-233.
    6. Pavel Ciaian & Andrej Cupak & Pirmin Fessler & d’Artis Kancs, 2022. "Environmental and Social Preferences and Investments in Crypto-Assets," JRC Research Reports JRC129919, Joint Research Centre.

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    More about this item

    Keywords

    self-confidence; financial literacy; financial behavior; gender; decomposition;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I20 - Health, Education, and Welfare - - Education - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy

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