Gender stereotypes make women less likely to take financial risks

Thursday, November 18, 2010

LONDON - A new study has stated that gender stereotypes about women actually influence how they make financial decisions, making them more wary of taking risk.

Anecdotally, many people believe that women are more risk averse and loss averse than men-that women make safer and more cautious financial decisions and some research has supported this, suggesting that the gender differences may be biologically rooted or evolutionarily programmed.

However, Priyanka B. Carr of Stanford University and Claude M. Steele of Columbia University thought that these differences might be the result of negative stereotypes-stereotypes about women being irrational and illogical.

So they designed experiments to study how women make financial decisions, when faced with negative stereotypes and when not.

Past research has shown that being faced with negative stereotypes about one’s group can hamper intellectual performance, and Carr and Steele reasoned it could also affect financial decision-making.

In the experiments, they altered whether the participants were made to think about negative stereotypes about women or not. Some volunteers were told that they would be completing tasks to measure their mathematical, logical, and rational reasoning abilities. Since the stereotype is that women aren’t talented at these things, this should raise the stereotype in the volunteer’s mind.

To be very sure, these people were also asked to indicate their gender before doing the tasks. Other volunteers were told that they would be working on puzzles, and were not asked their gender first.

When the negative stereotype about women was not hinted at, there were no gender differences in financial decision-making. Both men and women were moderately risk averse and loss averse. But when the negative stereotype was brought up, gender differences emerged.

Women made more cautious financial decisions: They were more likely to forgo lucrative opportunities so they could avoid risks and losses. Interestingly, when negative stereotypes about women (and therefore positive stereotypes about men) were relevant, men became more risk seeking. The stereotypical cues encouraged behavior that stuck to the stereotype. This suggests that earlier findings and anecdotes about differences in decision making between the sexes may actually be the result of gender stereotypes (and not the basis for them).

Carr said that to create more temperate financial decision making there may be no need in banks and on Wall Street for a “battle of riskiness between the sexes.”

“Our argument is that people’s decision making and financial choices should not be burdened by stereotypes being placed on them,” she said.

The study is published in Psychological Science, a journal of the Association for Psychological Science. (ANI)

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