I recently reviewed the latest research related to the issue of Gender and Risk. Based on what I’ve read, males are riskier than females, although the differences may be overstated in some situations. Whether the differences are large or meaningful seems to be the current subject of debate in academia, but from my perspective, there is no doubt that men take more risks compared to women. This is observable in the number of men and women playing poker, or the number of men and women as race-car drivers. In both cases, there are many men and very few women taking part. These are only two examples, and there are many more.
How does the different risk appetites of each gender impact social outcomes? If men are more likely to take risks, they are also more likely to have a greater variability of outcomes. Are men more likely to be entrepreneurs? Does this mean there are more men who will become bankrupt entrepreneurs and oppositely does this mean there are more men who will also be successful entrepreneurs? When we rank the highest income earners, does the basic statistics of risk cause most of the extreme high income earners to be men? Intuitively, if men are taking more risk, their outcomes will be more variable and extreme (both negative and positive).
Since I’m particularly interested in the study of financial risks, it was interesting to read about evidence showing women are better portfolio investors compared to men. Women suffer less from the drag of investing’s psychological biases such as overconfidence. Women are less likely to tinker with their portfolio, because they are less confident they can “beat the market”. Women are more likely to formulate a portfolio and stick with their plan. The greater propensity of men to tinker with their portfolio causes them to under-perform because of transaction costs.
Some studies point to physical or genetic causes behind the different risk perceptions that men and women have. These explanations are less convincing to me since more testosterone or other measurable aspects of chemical activity in the brain may be the result of the risky activity itself and not the cause of it.
Regardless of why men and women have different views of risk, I think it would be helpful to teach our children to have a greater appreciation of risk. A greater understanding of risk will help future generations manage the risky choices they will face and hopefully this education will narrow (or eliminate) the gap between the ways different genders perceive risk.
