The Influence of Gender on Individuals' Ability to Predict Their Own Risk Tolerance: Evidence from a European Country

• Type: Article in International Scientific Journal
• Date: 2024

Authors

Lobao, J (Author) FEP

Journal

Title: Administrative Sciences

Vol. 14

Final page: 56

ISSN: 2076-3387

Indexing

ISI Web of Knowledge - 1 Citation

ISI Web of Science

Scopus - 1 Citation

Other information

Authenticus ID: P-010-40R

DOI: 10.3390/admsci14030056

Abstract (EN): The literature on individuals' ability to predict their own level of risk tolerance is scarce and presents divergent results. Utilizing both differential prediction models and logit models on a sample of 391 individuals in Portugal, this study demonstrates that respondents' gender play a crucial role in this predictive ability. Men tend to overestimate their level of risk tolerance, while women tend to believe they are less risk-tolerant than they actually are. Furthermore, the results reveal that men's ability to correctly predict their level of risk tolerance is significantly higher. Being a man implies a 20% higher probability of being consistent in this prediction compared to being a woman, even after controlling for a set of sociodemographic factors. The finding of a systematic inconsistency between measures of subjective and objective risk tolerance suggests that the choice between the two measures of risk propensity is not indifferent. Our findings have relevant implications in the fields of corporate finance, financial investment, and various other spheres of economic life.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 16