Latest studies show that women with more testosterone tend to behave more like men when taking financial risks. So, it seems it is levels of testosterone not gender that is a good predictor in investor behavior when it comes to risk appetite.
The research was funded by the Templeton Foundation, the Zell Center for Risk Research and the Center for Research in Security Prices and the Initiative on Global Markets at the University of Chicago Booth School of Business.
Luigi Zingales of the University of Chicago, his co-author Paola Sapienza of Northwestern University, and their team tested the testosterone levels of more than 500 MBA students — males and females — and asked them to choose between a guaranteed monetary award or a risky lottery with a higher potential payout. Students had to choose repeatedly between the lottery and a fixed payment at increasing values.
Zingales recently told the USA Today, “Women with higher levels of testosterone turn out to be less risk averse, more willing to take risks.”
Although testosterone occurs in both genders, it is known as “the male sex hormone” and evokes images of competitiveness and dominance, reduction of fear, and with risky behaviors like gambling and alcohol use.
Sapienza added that women in general are less likely than men to take financial risks. She stated, “For example, in our sample set, 36% of female MBA students chose high-risk financial careers such as investment banking or trading, compared to 57% of male students. We wanted to explore whether these gender differences are related to testosterone, which men have, on average, in higher concentrations than women.”
This latest study adds to previous research in England which showed that “higher levels of testosterone seem to boost short term success at finance. Researchers there tested male traders morning and evening, and found that those with higher levels of testosterone in the morning were more likely to make an unusually big profit that day.”
According to the study:
- In general, men had higher levels of testosterone and were more likely to choose the risky lottery than women.
- Women with higher levels of testosterone were almost seven times more likely to take risks that women with lower hormone levels.
- There was no difference in risk-tasking between those with relatively low levels of testosterone — 90% of women and 31% of men.
- Married men and women had lower levels of testosterone than single individuals.
- Married people are also known to be more risk-averse than unmarried people.