Newswise — According to recent research conducted by the University of Bath School of Management, women exhibit a lower inclination to take risks compared to men. This tendency is attributed to their heightened sensitivity towards potential losses, prioritizing avoidance of pain over potential gains.
The British Journal of Psychology, in its publication of the study titled "Gender differences in optimism, loss aversion, and attitudes toward risk," sheds light on the subject. The research reveals that men, in comparison to women, exhibit significantly higher levels of optimism. This optimism plays a role in their increased willingness to take risks.
Dr. Chris Dawson, an associate professor in business economics at the University of Bath School of Management and the lead researcher, emphasized the importance of the findings. He stated that these results hold significant value as they could potentially provide insights into the divergent outcomes observed between sexes in various employment sectors and financial markets.
According to Dr. Chris Dawson, it is widely recognized that men tend to exhibit a greater inclination towards risk-taking compared to women across various domains. These contrasting perspectives on risk between genders can lead to significant consequences and impacts.
Dr. Chris Dawson points out that the variations in risk-taking behaviors between genders can offer insights into several societal patterns. For example, these differences may help explain why women are less likely to pursue entrepreneurship, face underrepresentation in high-paying positions and upper management roles, and exhibit lower participation in equity markets compared to men. Despite the significant implications of these findings, there remains a limited understanding of the underlying reasons behind women's tendency to take fewer risks than men.
Existing studies have indicated that women tend to display higher levels of risk aversion compared to men. This recent study aimed to explore the combined influence of two psychological traits in explaining these gender differences: loss aversion, which suggests that losses have a greater psychological impact than gains, and optimism.
Dr. Chris Dawson employed data from the UK British Household Panel Survey, which included a sample of 13,575 individuals, to gauge loss aversion. The study examined how fluctuations in household income between consecutive years correlate with changes in psychological well-being.
The study conducted by Dr. Chris Dawson revealed a noteworthy gender difference in the psychological responses to income changes. The findings indicated that men tend to experience less psychological distress in response to income losses compared to women. However, there were no significant variations between genders in the psychological responses to income gains.
Regarding self-perceptions of future financial situations, men displayed significantly higher levels of optimism compared to women when asked to envision their financial status one year ahead. This disparity in optimism levels between genders was observed specifically when contemplating outcomes that are believed to be within the individual's control.
The research suggests that men's higher levels of optimism could be related to their tendency to be overly confident about their abilities compared to women, as previous studies have also pointed out.
According to the research, women tend to have lower levels of optimism regarding the likelihood of positive outcomes and less confidence in their abilities compared to men. As a result, they naturally perceive a given gamble or risk as being riskier or more uncertain.
In conclusion, the study reveals that women exhibit a lower inclination to take risks compared to men. Approximately 53 percent of this gap can be attributed to higher levels of loss aversion among women, while an additional 3 percent is linked to lower levels of financial optimism in women. These factors contribute to the overall disparity in risk-taking behavior observed between genders.
Even when accounting for personality traits such as openness, neuroticism, and extraversion, the impact of loss aversion and optimism on risk attitudes remains significant. This suggests that these psychological factors have an independent influence on individuals' propensity to take risks, beyond the effects of personality traits.
RSS