Systematic differences in the attitudes of men and women toward risk is well established and has been shown to contribute substantially to gender-specific outcomes within labour markets and financial markets. In this paper, we explore some of the underlying behavioural characteristics that underlie this difference. Our starting point is that risk assessments can be thought of, in general terms, to combine beliefs about the probability of negative outcomes occurring with a subjective valuation of how painful that negative outcome would be. Exploiting large-scale panel data from the UK we find that financial optimism and the intensity of psychological reactions to monetary loss has a substantial effect on risk attitudes. We also find strong evidence that women are less optimistic and are more sensitive to monetary loss than men, with these differences explaining a significant proportion of the parallel gender difference in willingness to take risks.
|Publication status||Published - 23 Sep 2020|