Men and women differ in their attitudes towards and preferences for risk while investing. Psychologists suggest that women lack confidence and are more methodical in their information processing and accumulation style. These factors contribute to the increased perception of risk in them as compared to men. The paper investigates whether women are more risk-averse than men and the reasons suggested by psychologists for the same. The study indicates that men engage in more risk taking and are more overconfident than women. Women tend to put in a major portion of their funds in low risk - low return investments. However, the study suggests that men and women do not differ in their information processing and accumulation styles.

There is a common stereotype that women are more risk-averse than men. This risk aversion shows up in a variety of situations. Women smoke less, work in safer industries and prefer safer jobs. Whether this stereotype is true or not, it results in discrimination against women (Schubert et al., 2000). Women are not offered jobs which are risky or involve decision making under risk. Female managers have to face glass ceilings in corporate promotion ladders or settle for less compensation and salary packages than men (Johnson and Powell, 1994). The investment broker’s advice to women, most often, is for low return-low risk investments. Using a visual characteristic like sex, the advisor limits the range of options available to the client, to reflect his own perception of the client’s risk preferences which may possibly be incorrect (Eckel and Grossman, 2003).

In the recent years, however, the financial world has seen an increase in the number of women in professional investment position. In addition, women investors account for a major chunk of personal investments. By one estimate, nine out of every 10 women will be in charge of their family finances at some point (Kover, 1999; cited in Graham et al., 2002). This worldwide phenomenon is not uncommon in a culturally conservative country like India, where the number of women opting for careers in finance and banking is increasing steadily. The number of girls enrolling for
programs like Chartered Accountants (CA), Chartered Financial Analyst (CFA) and MBA (Finance) are also rising over the years. Even otherwise, with the change in employment scenario, more and more women are joining the work force and enjoying greater financial freedom and disposable income. They are fast becoming the decision maker of the family. They participate not only in the routine purchase decisions but also in issues of strategic and long-term advantage like children’s education and investments. Given the presence of women in both professional and personal investing it is essential to understand the gender differences in investing and risk preferences and the underlying reasons for the same.

Behavioral Finance Journal, Asset Pricing, Contingent States, Capital Asset Pricing Model, Prospect Theory, Financial Literature, Bullish Market, Asymmetric Evaluation, Capital Asset Pricing Model, French Market, Political Crises, Asian Financial Crisis.