Several studies have found gender differences in risk tolerance. Men, on average, exhibit more tolerance for risk in their financial decisions than women do. Past studies have not determined whether the difference is specifically due to gender or if it is due to other factors.

Researchers at Virginia Tech and the University of Missouri sought to determine whether other factors lead to or influence gender-related differences. They analyzed data from the 2013 Survey of Consumer Finances. Nearly 2,250 households included in the survey had a head of household who was not married or partnered. This national survey included a question asking respondents to describe how much financial risk they and their spouse/partner are willing to take when saving or making investments. The four response options range from taking “substantial financial risks” to earn substantial returns to “not willing to take any financial risks.”

The results confirmed the findings of previous studies: men, in aggregate, are more risk tolerant than women are. Approximately three-quarters of the men reported having a high risk tolerance (20.3%) or some risk tolerance (56.3%). In contrast, only half of women reported having a high risk tolerance (11.4%) or some risk tolerance (39.6%).

Income uncertainty had the opposite effect on attitudes toward risk. Men who expected to have uncertain income were 95.6% more likely to have a high risk tolerance compared to men with no income uncertainty. Women, on the other, hand were 6.8% less likely to have a high risk tolerance relative to women with no income uncertainty. A similar pattern was observed for “some risk tolerance,” with men being more likely to be risk tolerant and women being less likely.

On the other hand, increases in net worth had a larger, positive impact on women. A 10% increase in net worth led to a 4.6% increase in the odds of women having a high risk tolerance. For men, the same increase in wealth increased the odds of reporting a higher risk tolerance by just 1.7%.

The researchers observed lower average incomes for women. They found a higher percentage of women to have uncertain incomes from year-to-year. They theorize this may lead women to keep funds in low-return accounts to offset the risk of “negative income shocks.”

Source: “Gender Differences in Financial Risk Tolerance,” Patti J. Fisher and Rui Yao; Journal of Economic Psychology, March 16, 2017.