Are married women less risk-averse? If so, why?

Original source: SimoleonSense.com .

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Summary (Via Voxeu)
Does marriage make people less averse to risk? This column argues that this is the case for women, but not for men. But married women’s different attitude towards risk has fallen over time as the prevalence of marriage in society has faded. For women who work, marriage makes no difference.

Introduction & Excerpts (Via Voxeu)

A growing literature has explored gender differences in making financial decisions. At the same time, there is a parallel literature on the implications of marital status. This research generally reveals a higher degree of risk aversion among women and single people. Studies such as Sundén and Surette (1998), Jianakoplos and Bernasek (1998), and Barber and Odean (2001) consider marital status and gender jointly and conclude that single women exhibit the most cautious attitude.

A common explanation for these findings is that different choices directly reflect innate risk aversion, i.e., an exogenous personal characteristic that exhibits little time variation. With a focus on gender, Crozon and Gneezy (2009) survey the experimental literature and confirm that the stereotype that women are more risk-averse is supported by a robust and significant body of evidence which also points to nature, rather than nurture, as the driving force. But they also notice that gender differences in risk preferences are attenuated, and even disappear, when the subjects of the investigation are appropriately selected; particularly among managers and professional business persons, women no longer behave differently than men. They conclude by suggesting that different subsamples of the workforce may reveal similar patterns.

In a recent paper (Bertocchi et al. 2010), we focus on the impact of marital status on portfolio decisions, investigating the presence, determinants, and evolution of gender differences. In order to address these questions, we have two hypotheses.

Marriage as a risk-free asset

Our first hypothesis is that married women should become less risk-averse because marriage itself can be considered a fairly “safe asset”, especially for women. The idea of marriage as a source of financial security comes from the fact that women tend to have a more insecure societal role. Imagine there are two components of wealth: financial assets and the present value of labour earnings. By getting married, a woman becomes entitled to at least a portion of the gender gap in labour earnings. When no risks are associated with marriage status and the gender earnings gap, or when such risks are uncorrelated with the risks on financial returns, marriage can indeed be viewed as a sort of safe asset that decreases the overall variance of a married woman’s asset position. From this position of relative “safety”, the propensity to invest in risky financial assets should be higher for a married woman. Moreover, the difference between single and married women should be more pronounced than the difference between single and married men, originating a gender gap for the impact of marital status.

Click Here To Read: Are married women less risk-averse? If so, why?