Men are more willing to take big financial risks even when the financial return is unknown, a new peer-reviewed study by the University of California, San Diego found.
The study, titled ‘Gender Differences in ‘Optimistic’ Information Processing in Uncertain Decisions,’ is expected to be published in the journal Cognitive, Affective and Behavioral Neuroscience. It found that men are likely to view information about investment opportunities optimistically while women think more critically and are more risk-averse.
How the study was conducted
The study was conducted both online and in person.
The in-person experiment recruited 200 participants, with an average age of 20, who were mostly students. 58% of those recruited were women and 42% were men.
For the online experiment, 274 participants were recruited with an average age of 42. 48% of the participants were women and 52% were men.
Participants were asked to play games with cash stakes. Participants were asked to pay $10 (NIS 35.54) for the opportunity to withdraw a poker chip from a bag. There were two types of chips, a red one which would mean the participant won $20, and a blue chip which would be worth nothing. Players did not know the ratio of blue and red chips in the bag.
When little information was available, both men and women were wary about gambling on a chip. However, when information of any sort became available, men were more willing to gamble – even if the information suggested the odds of a red chip were not in their favor.
The gendered trend towards financial risk remained mostly the same across other demographic factors like wealth, age, education, and income.
'Men can be easily persuaded to spend'
“This research implies that men can be more easily persuaded to spend, but this is significantly related to the availability of relevant information about the situation.”
Assistant Professor Uma Karmarkar
Assistant Professor Uma Karmarkar, who ran the study, said, “This research finds that men and women actually show very similar responses in low-information, uncertain financial decisions. However, it also shows a key difference: as information is added, men tend to interpret it favorably, which in turn convinces them to increase the amount of money they’re willing to invest.”
“Missing information clearly bothers women more than men in this experiment,” Karmarkar said. “As such, this research implies that men can be more easily persuaded to spend, but this is significantly related to the availability of relevant information about the situation.”
The research findings are thought to reflect the psychological differences in men and women and their potential career implications.