Probing Women’s Sensitivity to Losses

‘For instance, differences between the sexes in risk-taking can explain
why women are less likely to be entrepreneurs, are underrepresented
in high-paying jobs and upper management, and are less likely to
invest their wealth in equities markets than men.

Women, Risk, and Sensitivity: New Insights

Despite these important implications, we still know very little about why
women take fewer risks than men.

“Myresearch attempts to fill that gap. When thinking about risky
choices, people tend to assess the probability of losing something
alongside an evaluation of how painful that loss would be. I found
that women take less risks than men as they focus more on the
possibility of losing and anticipate experiencing more pain from
potential losses,” he adds.

Previous research suggests that women are more risk averse than men,
and this study investigated the joint role of two
psychological characteristics to explain the differences – loss
aversion, the idea that losses loom larger than gains, and
optimism.

Women’s Response to Losses Over Gains

To measure loss aversion, Dr. Dawson used data from 13,575 people from
the UK British Household Panel Survey to assess how changes
in household income from one year to the next predict changes in
psychological well-being.

He found that income losses are less painful for men than for women with
no difference in the psychological responses to income gains between
the sexes.

When asked how they saw themselves financially a year from now with
expectations about outcomes under the individual’s control, men
were significantly more optimistic than women.

Risk Behavior: Decoded!

The research indicates that this optimism may be linked to men’s
overconfidence about their abilities compared to women which previous
studies have highlighted.

If women are both less optimistic about the probability of
favorable outcomes occurring and less confident in their
abilities than men, they will naturally evaluate a given
gamble as being riskier, the research says.

Overall, the study finds that women report a lower willingness to take risks
than men with 53 percent of this gap accounted for by the higher
levels of loss aversion amongst women and a further 3 percent
attributable to the lower levels of financial optimism amongst
women.

Loss aversion and optimism still have significant effects on risk
attitudes even after controlling for the personality
traits such as openness, neuroticism, and extraversion.

Reference :

1. Gender differences in optimism, loss aversion and attitudes towards risk -
   (https://bpspsychub.onlinelibrary.wiley.com/doi/10.1111/bjop.12668)

Source: Eurekalert