Gender-specific differences in the financial decision-making behaviour

Bachelor Thesis, 2015

78 Pages, Grade: 1,7


Table of contents

List of figures

List of illustrations

List of abbreviations

List of symbols


2.Review of relevant literature
2.1 Opposing opinions about the risk-taking behaviour of gender in literature
2.1.1 Gender-based risk-taking behaviour according to literature
2.1.2 Nature and nurture shape the risk-taking behaviour of gender
2.1.3 Contrary results - women do take risks
2.2 How overconfidence is seen in literature
2.2.1 Nature and nurture shape overconfidence
2.3 Financial literacy - The knowledge about managing financial resources
2.4 The way of obtaining information - how it can contribute to wealth
2.5 Gender differences in other financial aspects
2.6 Conclusion resulting from literature

3.Differences in the research implementation in comparison to existing literature
3.1 The importance of the research sample
3.2 The areas of investigation and stating hypotheses
3.3 The choice of a questionnaire as a research tool

4.Research Methods
4.1 Project Design
4.1.1 Question design to test hypothesis 1
4.1.2 Question design to test hypothesis 2
4.1.3 Question design to test hypothesis 3
4.1.4 Question design to test hypothesis 4
4.1.5 Sensitive information of participants
4.2 Descriptive statistics
4.2.1 Relevant general data
4.3 Examining relevant information resulting from the survey
4.3.1 Willingness to take risk
4.3.2 Overconfidence according to gender
4.3.3 Financial knowledge
4.3.4 Degree in information processing

5.Inferential statistics
5.1 Summary of the main findings
5.1.1 Findings of hypothesis 1
5.1.2 Findings of hypothesis 2
5.1.3 Findings of hypothesis 3
5.1.4 Findings of hypothesis 4

6.Discussion of findings

7.Limitations of the research
7.1 Sample size
7.2 Choice of research methodology
7.3 Other limitations resulting from conducting the research

8.Concluding remarks and outlook



Appendix 1: Distribution of participants according to gender

Appendix 2: Participants according to subject of study

Appendix 3: Comparing gender regarding the statement “I love learning new things about investing”

Appendix 3 cont’d: Comparing gender regarding the statement “I love learning new things about investing”

Appendix 4: Comparing gender regarding the statement “I am up-to-date”

Appendix 4 cont’d: Comparing gender regarding the statement “I am up-to-date”

Appendix 5: Comparing gender regarding the statement “If necessary I will make changes in my investment”

Appendix 5 cont’d: Comparing gender regarding the statement “If necessary I will make changes in my investment”

Appendix 6: Comparing gender regarding the choice of investment alternatives

Appendix 6 cont’d: Comparing gender regarding the choice of investment alternatives... 74 Appendix 7: Comparing gender regarding the acceptable loss in their value of assets

Appendix 8: Comparing gender regarding their self-assessment of their risk-taking behaviour

Appendix 9: Chi-square distribution table

List of figures

Figure 1: Numbers of participants according to gender

Figure 2: Distribution of participants according to the age range

List of illustrations

Table 1: Descriptive statistics about the age of participants

Table 2: Descriptive statistics about participants’ general opinions about finance

Table 3: Distribution of participants’ willingness to take risk

Table 4: Descriptive statistics of participants’ willingness to take risk

Table 5: Distribution of participants’ opinions regarding overconfidence

Table 6: Descriptive statistics of participants’ opinion regarding overconfidence

Table 7: Distribution of participants answers regarding financial knowledge

Table 8: Descriptive statistics of participants’ answers regarding financial knowledge

Table 9: Distribution of participants obtained source of information

Table 10: Descriptive statistics of participants obtained source of information

Table 11: Chi-squared test of independence testing hypothesis 1

Table 12: Chi-squared test of independence testing hypothesis 2

Table 13: Chi-squared test of independence testing hypothesis 3

Table 14: Chi-squared test of independence testing hypothesis 4

List of abbreviations

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List of symbols

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The purpose of this paper is to examine, whether gender differences in financial behaviour are still evident nowadays. Commonly it is assumed that women tend to be more risk-averse while men are more risky and overconfident in regard to financial topics. These assumptions of gender-differences are investigated in this research. Further this paper explores the gender-based differences in financial literacy as well as the gender disparities in obtaining information. A survey was conducted to gain information about the financial behaviour of undergraduate students from the Trier University of Applied Sciences. Results show that, in this sample, gender does not influence risk-taking behaviour, financial knowledge, or the way of obtaining information but only affects the degree of confidence.

1. Introduction

The gender differences in financial behaviour are interesting aspects, which need to be examined. The knowledge and information that are gained from such a research can be used to better understand the financial environment and further, they can help make enhanced financial decisions, so that negative financial fallouts can be avoided. However, these differences seem to be a puzzling issue, which attracts the attention and the interest of many financial experts and researchers.

Risk-taking behaviour affects the financial world in many ways, like its influence on the choice of stocks. For that reason it should be considered as an important financial issue that needs to be further investigated. The majority of researchers in recent decades share the same opinion that men and women differ significantly from each other in their financial behaviour (cf. Croson & Gneezy, 2009; Almenberg & Dreber, 2011; Fish, 2012). Nevertheless, contrary opinions also exist (cf. Powell & Ansic, 1997; Schubert et al. 1999) and further, also the aspect of nature and nurture seems to play a huge role (cf. Coates, 2013). By any means, consistent explanations of whether these differences are really apparent or not, could not be found. Hence, it is important to explore, which opinion reflects the reality.

Further if questions like “Are gender-based stereotypes in financial behaviour still evident nowadays?”, or “Are only men overconfident, delusional and risk-taking, consequently causing danger like stated in literature?”, can be answered, they might also provide explanations for recent happenings in the financial market, like the dotcom bubble or the collapse of Lehman Brothers (cf. Prügl, 2012; Sunderland, 2009). Constant further research on this area is of great value and is clearly needed, so that knowledge can be use wisely and information can be kept updated, in order to avoid negative outcomes. As opinions of experts vary significantly from each other, it is of great importance to consider both views and have a closer look at former researches. Owing to these contradictory views in literature, this paper has the objective of examining whether gender differences, especially in the four dimensions risk-taking, overconfidence, financial literacy and information processing, are available and whether they have an influence on the decisions of males and females.

A survey with 23 questions was conducted and handed out to 240 undergraduate business students, attending the same mathematics course at the Trier University of Applied Sciences, so that explicit answers could be obtained. Four hypotheses were tested to cover the four desired objects of investigation - the risk-taking behaviour - overconfidence - financial literacy and information processing. The first hypothesis tests that “men have a higher risk tolerance than women”. The second hypothesis states that “men are more overconfident than women when it comes to financial decisions”. The third hypothesis “men are more financial literate than women” tests whether gender differences in financial knowledge are evident and the hypothesis “men select different information cues than women” tests the process of obtaining information by gender.

The rest of this research paper proceeds as follows: Section 2 summarizes findings of gender-based differences in the existing literature and further present the different opinions of various authors regarding these differences. Section 3 deals with a short comparison between the research methods of the existing literature and the chosen methods in the conducted survey. Section 4 presents the design and the key structure of the conducted research. Moreover the descriptive statistics is shown in this section. Section 5 introduces findings, which resulted from the evaluation of the survey. Further limitations are presented in section 6, section 7 summarizes the findings and section 8 presents the conclusions about this research.

2. Review of relevant literature

Gender differences occur in various aspects of life from pay inequalities to the challenges in gaining high management positions. Therefore it is of great significance to look at them from the financial behaviour perspective. As it seems to be an interesting topic, multiple researches had been already made and various experiments have been conducted, where results differ greatly across samples. It is important to mention that one purpose mainly stays the same in all of the researches. The findings should help people understand the financial world better, in order to draw a clearer picture of the economic environment. Consequently, these researches are of great relevance for today’s fiancial happenings.

On the whole, despite of the several experiments conducted, authors have not been able to come to a common opinion about the reappearing differences in research outcomes. For this reason, it is even of greater necessity to further conduct researches and broaden the knowledge about this topic. The purpose of this research, hence, is to expand the knowledge gained from previous work, and further investigate the wide financial domain, where gender differences are evident.

2.1 Opposing opinions about the risk-taking behaviour of gender in literature

Financial risk tolerance according to Grable (2000), is defined as the maximum amount of uncertainty that someone is willing to accept, when making a financial decision. One can rank a person as being financially risky or risk-averse. One of the major differences, which many researchers claim to be an apparent and a noticeable difference between man and woman is the risk-taking behaviour (cf. Croson & Gneezy 2009; Jacobsen et al., 2010; Powell & Ansic, 1997; Schubert et al. 1999). Nonetheless, it is also commonly known, that individuals have strikingly contrary opinions about the important issue of taking risk.

On the one hand, successful business people mainly state that risk is something one should be prepared to take. The well-known internet entrepreneur Mark Zuckerberg, for example, claims that “The biggest risk is not taking any risk… In a world that changing really quickly, the only strategy that is guaranteed to fail is not taking risks” (Tobak, 2011). Zuckerberg is popular with his business strategies and represents the opinion that taking risk is necessary when doing business.

The financial explanation for taking risk, is that higher risk usually provides higher or above-average returns, therefore successful entrepreneurs tend to be risky investors, who 8 as a result obtain wealth fast and on a high scale. Nevertheless, people might argue that Zuckerberg is a successful businessman due to being male and the success might result from the common belief that men prefer to take higher risks. But, stereotyping gender might result in wrong or imprecise assumptions, as there are many successful women, who own a business or work as the CEO of large global companies, like Virginia Rometty the CEO of IBM, Indira Nooyi the CEO of PepsiCo, and Marissa Mayer the president of Yahoo (Arora et al., 2014). Thus, it is necessary to investigate, whether the risk-taking behaviour plays a huge role in being successful as a businessperson or as an investor.

2.1.1 Gender-based risk-taking behaviour according to literature

Women are generally seen as risk-averse in many areas of life in comparison to their male counterparts (Hersch, 1996; Olsen & Cox, 2001). Regarding the risk-taking behaviour of men and women the majority of researchers come to the standard conclusion that women are less likely to take risks than men (cf. Charness & Gneezy, 2007; Halko et al., 2012; Jacobsen et al., 2008; Schubert et al., 1999; Powell & Ansic, 1997). Even with real-life experiments, like forecasting gambling choices or monetary lottery experiments, researchers conclude that women are significantly more risk-averse than men (cf. Dwyer et al., 2002; Eckel & Grossmann, 2008).

Interestingly, the source of risk-aversion of women regarding financial cannot be clearly defined. As mentioned in different literature, women generally hold, on average, less risky portfolios (Jacobsen et al., 2010), they are more risk-averse to competition in the financial market (Croson & Gneezy, 2009), to stock investments (Graham et al., 2002) they also make smaller financial investments than men (Charness & Gneezy, 2007) and furthermore they take less risk in their mutual fund investments (Dwyer et al., 2002).

Of course these assumptions of authors result in consequences for women working in the financial arena, as they have to face the stereotypical assumption that women, in general, are less risky and too cautious. Also, a few authors recognize the influence these research results have on women. Consequently, people believe that women can be less trusted than men to make risky decisions that may be necessary for a firm’s success, according to Schubert et al. (1999).

Another attempt to explain the risk-aversion of women is that they might have different perspectives and values and prefer wealth accumulated over the long-term instead of gambling and gaining money over the short-term. Barber (2012, p. 3) explained this view as “Men are more focused on wealth accumulation, and women are more focused on preservation. Women tend to be more attracted to planning, and they’re cash-flow driven”.

This view is also shared by Lascu et al. (1997), who found out that women adopt a more conservative investment strategy than men, where they invest in safer vehicles such as government bonds, while men tend to be less conservative and invest in higher-risk products such as high-growth stock.

In addition, a further view on the gender risk-taking behaviour explains that emotions play a major role and hence, affect the evaluation of outcomes. The explanation why women are more risk-averse is, that their social preferences are different than those of their male counterparts. On the one hand, women have different emotional reactions to risky situations and prefer to avoid the unpleasant circumstances (Croson & Gneezy, 2009) but men on the other hand, tend to consider risky situations as thrilling and view them as great challenges, which need to be overcome. As a consequence, they accept risk and establish an increased risk tolerance (Croson & Gneezy, 2009).

In conclusion, these results from former researches, which mainly explain that women tend to be more risk-averse imply that women tend to think over the long-term and are cautious about their actions and are emotionally different in regard to financial aspects in comparison to men. However, other explanations are also available and need to be further evaluated.

2.1.2 Nature and nurture shape the risk-taking behaviour of gender

On the whole, the trait of being risky or risk-averse is being classified differently by various authors and a common definition is not given. Accordingly, a new approach in investigating the issue is being brought up by some financial professionals, since the issue of investigating risk is not easy to approach. This group of research investigators argue that the gender differences in risk preferences can result from two important factors, the taught differences called nurture and the ingrained differences, which can be distinguished and called as nurture. (cf. Barber, 2012; Barnea et al., 2010; Coates, 2013; Croson & Gneezy, 2009). Barnea et al. (2010), for example, examined twins to gain results about the risk-taking behaviour and found out that “nature is an important determinant of an individual’s investment behaviour…” (p. 602).

The interesting view that genes and environment can influence the behaviour of human is also recently extended by Coates (2013), who reports that nature and nurture plays a huge role referring to the gender financial behavour. According to Coates (2013), a group of hormones including testosterone, estrogen and cortisol, called the steroid hormones, has special effects on the risk-taking behaviour on tradefloors. Therefore, when testosterone levels rise in men, their appetite for risk rises. As a result, the author describes that “Testosterone may be the molecule of irrational exuberance” (Coates, 2013, p.194) and he describes that “When traders, most of whom are young males, make money, their testosterone levels rise, … , causes them to become every bit as delusional, overconfident and risk-seeking as those animals venturing into the open, oblivious to all danger” (p. 28).

Ultimately, these findings lead to the assumption that women are less risky than men, as their biology is obviously different from those of men, as testosterone is mainly a male sex hormone. Women should be relatively uninfected by risk (Coates, 2013). As nature and nurture seem to be a factor in influencing humans, it is important to consider these results to understand the behaviour of human beings on financial decisions better.

2.1.3 Contrary results - women do take risks

Looking beyond the majority of researches, which come to the same conclusion that women tend to be more risk-averse than men, there are also researches, which state the opposite and present interesting findings. These findings are supposed to deal with stereotypical assumptions, which result in consequences for women in the working environment, therefore, these researchers suggest that former results, should not be further generalised (Powell & Ansic, 1997).

Thus, this group of researchers interpret that the “statistical discrimination might diminish the success of women in financial and labour markets” (Schubert et al. 1999, p. 381) and most interestingly, when studying female behaviour under controlled economic conditions, it could be found out that they do not generally make less risky financial choices than male subjects (Schubert et al. 1999). These researches, hence, provide contrary results compared with researches by former authors regarding female risk-taking behaviour. Moreover, they disagree with the common opinion of the public with revealing their findings that abstract gambling experiments may not be adequate for the analysis of gender specific risk attitudes toward financial decisions (cf. Schubert et al. 1999).

As a result, researches stating the contrary compared to the general public, open up an interesting discussion and serve as an argument against the assumptions that women are risk-averse. In conclusion, the explanation is that the stereotypic risk-averse acceptance of women can be due to the use of wrong research methods, like abstract gambling experiments. This research, therefore, might serve as an indicator that one tend to underestimate women and stereotyping genders result in gaining imprecise information and misunderstandings, which has a huge effect on women working in a financial environment.

2.2 How overconfidence is seen in literature

As mentioned researchers are tempting to conclude that as women hold, on average, less risky portfolios, they are more risk-averse (Jacobsen et al., 2010). However, it is worth mentioning that the behavioural trait of overconfidence is closely linked with the risk-taking behaviour itself. Hamilton (2002), a famous writer, mentioned in her work that confidence is a fine trait, overconfidence isn’t. This statement can also be applied to the financial behaviour of human and, further, has a huge influence on the financial investing behaviour.

Regarding the issue of overconfidence but also optimism, researchers also gain contrary results when conducting experiments. First of all, researchers need to consider that stereotyping might appear as the common belief is that men overestimate their ability when investing money and taking financial decisions, whereas women do not overestimate their ability and act in an appropriate manner regarding financial decisions (Barber & Odean, 2001; Croson & Gneezy, 2009; Gysler M. et al, 2002; Huang & Kisgen 2013).

Some studies found out that men are generally more optimistic about financial aspects, like the future performance of economic and financial indicators than women (Jacobsen et al., 2010), but they are also overconfident about their abilities, knowledge and future prospects with regard to finance, according to Barber & Odean (2001). This in conclusion result in greater trading and worse performance (Wann & Lobo, 2010). Overconfidence, hence, is seen as a negative trait of male traders. Since researches, in general, state that men are more overconfident than women, it is of value to look further into the topic and analyse, whether also female financial investors might face the issue of overconfidence. Researches, which further look at this aspect come to the conclusion, that women possessing high knowledge and working in their professional field of business are still underconfident in comparison to men in the high knowledge group. Additionally, in these researches, men tend to be fairly accurate in their self knowledge (Gysler, M. et al., 2002).

Eventually, men seem to be more vulnerably to overconfidence, than their female counterparts, which is considered to be a a negative trait especially when working in the male-dominated field of finance. Both overconfidence and optimism are traits, that are not helpful. Besides, it is necessary to take into consideration, that these traits are disadvantageous for male traders (Huang & Kisgen, 2012). As a consequence, investing can have a huge impact on the value of money and further value destroying acquisitions might happen if a person is more prone to overconfidence or optimism (Huang & Kisgen, 2012). This problem will not particularly occur within female traders, as women are commonly not competitive but tend to be more altruistic (Huang & Kisgen, 2012).

2.2.1 Nature and nurture shape overconfidence

Coates (2013) also provides an explanation for the behaviour of men as a trait resulting from nature. According to his opinion the high testosterone level of men not only leads male traders to be more risky but also drives them to be more delusional and optimistic, when being involved in the decision-making process. Also, as the testosterone level rises in entering trades, male traders are on a roll, their testosterone level can get higher and higher, until their self-confidence then turns into the bad trait of being overconfident and reckless.

On the other hand, women will not face the issue of a rise in their steroid hormones, therefore, being less prone to thoughtless, irrational actions (Coates, 2013). These assumptions should lead to the solution that there are less overconfident female traders, as they possess the good characteristics of being a trader. Therefore, it is necessary to look at the behavioural traits of investors but also further look at other aspects, which might serve as explanations why men behave the way they do and women, in comparison, act in their own way.

2.3 Financial literacy - The knowledge about managing financial resources

A further substantial difference between men and women is their degree of financial literacy, which is viewed as crucial when working in the economic environment (Lusardi & Mitchell, 2008). Financial knowledge is described as having knowledge about e.g. the stock market, financial environment and much more (Almenberg & Dreber, 2011). So, it is likely that having financial knowledge has a huge impact on how people behave. One can argue that knowledge of a topic is related to a person’s accurate evaluation of the topic. Therefore, according to Jacobsen et al. (2010), women might, in general, be less knowledgeable about the economy or are less interested and for that reason they are more cautious in their assessments.

Many researchers conclude that with the general view that women, who typically participate less than men in the stock market, are also linked with the fact that they achieve a lower score in financial literacy (Almenberg & Dreber 2011). In conclusion, financial literacy can clarify why there is a huge gender gap in the observed market participation. Moreover, it plays a huge role in many aspects of financial issues as financial literacy is being associated with successful planning for the future, especially retirement and assessing money effectively. For this reason, having a closer look in the research is clearly of advantage.

2.4 The way of obtaining information - how it can contribute to wealth

In the financial context, obtaining information is the way of how information can be collected and processed. Consequently, the issue of collecting valuable data is also of great importance. Financial knowledge helps understand the aspect of financing and investing better, as well as it enhances knowledge about the financial situation of a company (Dionne & Triki, 2005). As a result, it is necessary to look at the differences in how men and women acquire their information and how they will use them to their advantage.

Mainly, there is a stereotypic view that women tend to be more holistic in their investment process, as the majority of female traders consider all of the relevant investment factors. According to literature, women are more detail oriented, they read more about their investments and try to understand what they are doing when investing in something and lastly, they pose more questions to financial experts (Graham et al., 2002).

Accordingly, the way of collecting data plays a great role in accepting a certain degree of risk and influences a person’s risk taking behaviour, as a holistic way of obtaining information is seen as being more risk-averse and a heuristic way of collecting data is considered as being more risky (Graham et al., 2002). In other respects, women are more likely to consult a financial adviser and further seek for help from friends, family and colleagues more than men (NES, 2006). In comparison, men want to gain their answers themselves from sources like the internet and therefore, do not rely much on social networking (NES, 2006).

Besides, the selectivity model implies that males are likely to select information cues, which only contain a single idea of inference, hence, men are perceived to be more heuristic in the selection and procession of information (Darley & Smith, 1995). On the contrary, females tend to be more comprehensive about the information cues and are likely to use a variety of information cues with a holistic processing strategy (Graham et al., 2002). As men, according to past research, are reported to have a processing style that reflect a schema-based strategy, this aspect might probably influence the investor’s perception of risk leading to different investing strategies (Graham et al., 2002).

Once and for all, a further research of this aspect might solve many occuring questions regarding gender differences in the way of acquiring information and additionally, helps to determine whether collecting data has a certain influence on the other aspects of financial behaviour.

2.5 Gender differences in other financial aspects

The gender differences in financial behaviour do not consist of the four objects of investigation alone, but it is of importance to keep in mind that other gender-based differences are also present. These differences are worth mentioning and probably can provide certain answers to some puzzling questions. By all means, all gender-based differences in financial behaviour have a certain impact on each other, and also influence each other in a certain way. As the other gender-based differences are not a focus on this research, they will only be mentioned broadly in this section, so that a brief overview can be made.

First of all, through research it could be found out that women not only make different corporate financial decisions but also different investment decisions than men. While testing a group of financial experts, who have extensive knowledge on financial issues, statistical findings show that femal executives are less likely to make acquisitions and additionally, are less likely to issue depbts than firms than male executives (Huang & Kisgen, 2013). Further the investment approach seems to be different among genders. Commonly, there is also a stereotypic view that men are, by far, more active investors than women, since they change their investment sums regularly, review their performance very often and alter their asset allocations much (NES, 2006).

Besides, as mentioned earlier the view on competition is mixed among genders. Typically, men are more responsive to competition due to the fact that both nature and nurture are responsible for the gender differences in competition. Male traders are more prone to competition and are likely to favour competition, compared to female traders (Croson, 2009). Another gender difference is that women are not well prepared for their retirment, according to some literature. The problem, which many authors point out is that, on a whole women tend to select conservative and disadvantagous investment programs, which do not beneficially serve them in their finances as reported by Dwyer (2002) and Lancaster & Raj (2009).

To conclude, all the differences between gender mentioned above, are further examined by researchers and various outcomes could be generated. Still, it is worth mentioning that some literature argue that the differences in the financial decision-making characteristics of males and females only occur in the general population (Johnson, & Powell, 1994). To summarize, within finance professionals it should be logical that women, who possess the same financial knowledge might tend to act in the same way as their male counterparts. Consequently, stereotypes may not apply to financial experts and female managers (Schubert et al. 1999).

2.6 Conclusion resulting from literature

The gender-differences in financial behaviour is a widely discussed topic among financial experts. Findings of these researchers can help understanding the financial world better and might provide explanations for financial happenings, for which, causes are often very difficult to find out. Most importantly, there are many differences which could be observed and the question of whether these differences are apparent takes place. Only with the introduction of a chosen set of research papers, it is possible to show that many of the observed gender differences in the financial behaviour stir the interest of experts, which afterwards evolves to a widely discussed topic by researchers. Not only the typical difference in risk-taking behaviour and confidence level of gender are discussed, but further differences are also tracked and introduced as objects of investigation.

Although researchers publish various findings of their work, coherent answers to the available questions are not evident, as the opinions are, in most instances, contradictory. Still, it is noteworthy, that all of the researches are of great value as they can still serve as a broad basis of knowledge, to gain a further look at the vast and complicated issue of gender-based differences in the financial issues. Furthermore, they offer information on which one can build up own research and hypotheses. That is the reason why studies about these financial topics are needed and has a right to exist, as research can be driven forward and information can always kept up-to-date to deal with the financial environment.

On the ground that inconsistent findings in previous researches are available, conducting another research about the topic of gender-differences in financial behaviour is of value and reasonable. Particularly, the four areas of finance risk-taking behaviour, overconfidence, financial knowledge and information processing need to be further researched and it is necessary to move on to a self-conducted experiment, to gain further data and explicit information. Eventually, the next required step is to compare the outcomes of the own research with the various former findings in literature.

3.Differences in the research implementation in comparison to existing literature

The purpose of this research was to examine the different financial behaviour of gender and additionally, to identify which groups of former researchers use good research methods to find out whether gender differences are apparent or not. For the research to be of value, it is of importance to look at different angles of the financial gender issues with keeping the findings of other authors in mind and if necessary, build on the knowledge of past research. In consequence, this research should point out whether gender differences in the financial behaviour are still available nowadays.

As past authors could not come to the same conclusion, due to the differences in conducting an experiment and as various research methods are used, this research tries to use convincing methods. Further, this leads to differences in measurements and other issues, which are mentioned in the limitations in section 7. But, still the different aspects , which were made in this research, need to be mentioned, as they might help to further elaborate on the topic in overall and subsequently, they might not only help to find out more about the own outcome, but also provide more information to the findings of former researches.

3.1 The importance of the research sample

First of all, the work differs from the existing papers or conducted researches in the sampling group. The majority of prior researches use samples, where they do not control for the level of education or the same age range, as well as they do not differ between specialist or non-specialist investors. Comparing male specialists with female non- specialsts regarding finance or the other way round does not make sense. Therefore, the results from other authors might not have a strong explanation character, as the outcomes will tend to show stronger gender differences, which clearly diminish the strenghts of the results.

It is necessary to define a sample group as this aspect has the highest impact on the results of the research, and of course, different sample groups will lead to different findings, which in turn lead to a significant difference in the interpretation of the results (cf. Sekaran & Bougie, 2013; Maylor & Blackmon, 2005). In this research the sample is taken from students studying in a mathematics course at the Trier University of Applied Sciences. All male and female students are enrolled in the business department at the university for the winter semester 2014, and pursuing a Bachelor of Arts degree. This sample group should guarantee that all students have approximately the same age and the same level of knowledge about basic business issues and as a consequence, can make some financial decisions for themselves. The advantages in having such a sample is that subjects can be tested under the same environment and under the same conditions. As they were being tested in a mathematics course, it could be guaranteed that the experiment is set up as a classroom experiment., where it could be guaranteed that the experiment was under control .

Another important benefit results from the chosen sample group. The age range of the participants, from 20 till 30 years could be maintained as age is presumed to be a factor, which influences the financial behaviour of participants. The reason for the chosen age range is that it is likely that students usually do not have access to a huge amount of money, to feel free to gamble without hurting themselves financially. The assumption is that subjects in this age range might handle their finances with responsibility and foresight and are not prone to gamble or to take excessive risks.

Correspondingly, the sample can better evaluate the risk-taking behaviour of the subjects and includes many benefits such as reliability and representativeness that can result in enhanced findings for the conducted research.

3.2 The areas of investigation and stating hypotheses

Moreover, also the area of investigation in this experiment differ from those, which were formerly conducted by other authors (cf. Barber & Odean, 2001; Dwyer, 2002; Gysler M. et al, 2002; Lancaster & Raj, 2009). To test the differences between man and woman in their financial behaviour, this research looked at four objects of investigation - risk-taking behaviour - overconfidence - financial knowledge and the differences in information processing.

The structuring of the experiment as well as the definition of the four objects of investigation had not been further introduced or investigated in previous researches. Only few of the objects of investigation as part of an experiment had been covered by other authors, e.g. risk- taking behaviour alone (cf. Powell & Ansic, 1997; Schubert et al. 1999).

The combination of the four areas of investigation in an experiment, as such, is introduced for the first time in this research and should serve as a purpose to gain an overall view of the financial topics and it should also find out whether these four objects correlate in a certain way and whether gender has in influence on them. Hence, this research covers the four interesting aspects of gender-differences in one experiment and, on that account, it is of great value.

Still, it is important to mention that the hypotheses, which are stated in this research and were tested in the survey are partly similar to those stated in further researches (cf. Fish, 2012; Halko et al, 2012; Jacobsen et al. 2010). However, opposite to previous researches stereotyping women in advance regarding risk-aversion, overconfidence, financial knowledge, and information processing stereotypes were not made. Being neutral in the experiment is an important matter and had a high priority.

3.3 The choice of a questionnaire as a research tool

As the purpose of the research was to gain explicit results from the experiment to explain whether gender differences are apparent, a questionnaire was used. This chosen research method is different in comparison to the majority of previous studies. Many authors of previous studies prefer to copy the real world of investing and mainly use gambling choices, monetary lottery experiments, or simulations of trading floors, as their research methods (cf. Almenberg & Dreber, 2011; Eckel & Grossmann, 2008; Gysler, M. et al., 2002; Schubert et al., 1999).

The advantages, which result from such a choice in research methods, are that these procedures are assumed to be able to copy the real state of investing. However inconvenients, like time or cost constraints or the difficulty in using trading softwares, might also occur. These challenges might discourage subjects, who are not comfortable enough to use financial softwares or programs, to participate in such an experiment. Furthermore, these methods assume that subjects are professional traders, which generally is not the fact for the general population.

Thus, using a questionnaire as a research tool is practical and also results in many advantages for the researcher. Basically, it is easier to conduct, the costs for conducting a survey is not too high and the purpose of the survey is easier to be understood by subjects and moreover, it can be guaranteed that participants of the questionnaire will spend time on it and fill it out. As a consequence, the issue of a refusal to participate in a survey is not likely to happen and a good sample size should be possible to be reached (Sekaran & Bougie, 2013). On these grounds getting data from a survey is adequate.

To sum up, the differences in comparison to other researches were made so that the research can fully exploit the advantages, which results from conducting a survey. Nevertheless, it is noteworthy that this chosen method as well as the various decisions or changes, which were made to conduct this research, can also have its weaknesses in comparison with other methods to a certain degree. However, the reasons why the research is arranged as such is stated above and have its own merits. But, as limitations are available in every research, it is necessary to mention them. A detailed description of the limitations can be found in section 7.

4. Research Methods

4.1 Project Design

A survey was conducted to collect data from participants. About 240 surveys forms were distributed to students from the same mathematics course at the Trier University of Applied Sciences. All students study business administration, international business and business information systems and were in the same age range, therefore, one can assume that they possess the same knowledge level. With regards to business students the questionnaire consisted of easy and understandable questions. In addition, many multiple choice questions were included in the questionnaire to ensure that participants could answer them even if there was the issue of time constraint. The questionnaire should help solving the following research questions:

1)Are there any differences in the risk-taking behaviour between a man and a woman?
2)Does gender influence overconfidence?
3)Are there any striking differences in the financial knowledge when comparing gender?
4)Are there any gender differences in acquiring information?

With the help of these valid questions it is possible to further evaluate on gender differences and are the first step to an own-conducted survey. The survey started of with a precise introduction and a formal statement of confidentiality, so that participants understand why the survey is conducted and where it is guaranteed that the collected data will only be used for this research. Hence, participants can be at ease to give their private information away. The survey is mainly divided into four parts, which in overall consists of 23 questions. These questions examine the four objects of investigation and finally, the last part of the survey deals with the private data of participants.

In Part 1 of the survey five questions were asked to examine the first hypothesis about the risk-taking behaviour according to gender. Part 2 consists of four questions testing overconfidence and optimism. Moreover, six questions were included to find out more about the financial literacy of subjects and the last part consists of eight questions, which should examine the different way of obtaining information between man and woman. Additionally to the four parts, private questions were asked as well, so that the author of the research can find out more about the general financial and social aspects of the subjects.

4.1.1 Question design to test hypothesis 1

To further elaborate on the first research question “Are there any differences in the risk- taking behaviour between man and woman?” the first hypothesis was stated as “Men have a higher risk tolerance than women.” In order to gain data to answer this research, three questions were asked in the survey, with each having four answer options. The rationale for providing four answer options in a multiple-choice question was to hinder subjects choosing a “middle answer”, which often happens in surveys. Additionally, the questions should motivate subjects to evaluate themselves and think about their own risk- taking behaviour.

Further, one question is included in Part 1 of the survey, which asked about the different feelings of subjects regarding investing. In this part, subjects had the opportunity to rate themselves on a likert scale from “strongly disagree to strongly agree”. Reasons for using this sort of questions is to find out more about a participant’s self-evaluation of their preference in taking risks, regarding certain financial questions.

4.1.2 Question design to test hypothesis 2

To answer the second research question “Does gender influence overconfidence?” the second hypothesis was formulated as “Men are more overconfident than women”.

Questions testing this hypothesis are mainly based on the rating scale pattern, as participants evaluating themselves are a good source to gain a better insight on their preferences of financial aspects and feelings about finance.

In this part, the first two questions asks about the opinion of the subjects regarding their feelings about the future, with respect to the factors affecting the investment environment and the stock market. Here, participants should rate themselves on a 5-point rating scale. Simultaneously, the opinion of students regarding the future, on the middle-long and short term, is examined in this part. The reason is that answers to these questions might help to understand the self-estimated confidence of subjects, as well as their optimism.

The last part the second section of the survey further elaborates on the optimism degree and confidence level of subjects, regarding their understanding of the stock market in Germany (DAX), their ability to make investment decisions, their confidence in investing and their calculation skills.

4.1.3 Question design to test hypothesis 3

Following the second part of the questionnaire, the next part of the survey should provide answers to the research question “Are there any striking differences in the financial knowledge when comparing gender?” Therefore the third hypothesis “Men are more financial literate than women” is introduced to be able to elaborate on the research question. This section of the survey largely included TRUE/FALSE questions, to test the financial literacy of subjects.

Most importantly, participants needed basic knowledge about interest rates, inflation, stockmarkets and risk and return to be able to answer the questions. In addition to that, one open-ended question about bonds is asked, which is rephrased as the following: “Bonds are securities, which pay a fixed interest during a specified time period. If the interest rate falls, what should you expect of the bond prices?” This open-ended question should guarantee the validity of the former questions posed as TRUE or FALSE questions. The rational behind this chosen method is that the probability to tick the right answer for a TRUE or FALSE question is high with 50%, however an open-ended question provides a higher guarantee that participants answering the question of the survey, really has financial knowledge about the topic.


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Gender-specific differences in the financial decision-making behaviour
University of Applied Sciences Trier
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gender, difference, financial, behaviour, risk, overconfidence, financial literacy, optimism, finance, woman, man
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Van Anh Hoang (Author), 2015, Gender-specific differences in the financial decision-making behaviour, Munich, GRIN Verlag,


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