Gender Differences in Financial Risk Taking: The Role of Financial Literacy and Risk Tolerance

Abstract

We study financial risk taking via standard and sophisticated financial investments. Using survey data on 2,047 individuals, we find that standard investments are strongly associated with both actual and perceived financial literacy for men, but only with actual literacy for women. Sophisticated investments, in contrast, are significantly related to perceived financial literacy with an even stronger association for women than for men. Interestingly, risk tolerance does not affect women's sophisticated investments.

Keywords: Financial risk taking, financial literacy, risk tolerance, gender, household finance

JEL Classification: D91, G11, D83, J26