The Effect of Gender on Investors’ Judgments and Decision-Making

Abstract

We examine whether an unsophisticated investor's own gender interacts with gender of a sell-side equity analyst to affect the investor's judgment. Prior research shows two potential sources of gender-based discrimination that affect female investors. First, female investors' advisors offer less risky hence lower return portfolios to female investors than to male investors with similar risk preferences as female investors are perceived as more risk adverse. Second, female equity analysts are subject to greater barriers to enter and advance in investment firms that act as if they believe clients prefer male investment advisors in a male stereotypical occupation. Using two experiments, we use the judge-advisor framework to predict and find that investor's gender and analyst's gender jointly influence investor's judgment. Specifically, female-female analyst-investor pair generates the strongest reaction to analyst's advice compared to any other analyst-investor pair, everything else equal. Further, we find that efforts to highlight equal gender performance activates gender stereotypes that reduce female investors' receptivity to female analysts' advice. By linking the two previously different sources of discrimination we show that they reinforce each other and find that attempts to "level the playing field" by emphasizing gender performance parity may have unexpected results.

How do Australian female consumers exercise their decision-making power when making financial product decisions? The triad of financial market manipulation, rationality and emotions

“…While many studies on financial decision-making claim that people act rationally when making decisions, more recent research shows that emotions and personality traits also play a significant role in decision-making (Wynes, 2021; Dibb et al ., 2021; Griffith et al ., 2020). More specifically, gender stereotyping/gender differences have often been well-documented and imply that female counterparts are more risk averse than their male counterparts when making decisions and are less competent in statistical calculations and finance than men, which contributes to underrepresentation of female counterparts in financial decision-making (Bottazzi and Lusardi, 2021; Luo and Salterio, 2022). Several studies linking gender stereotyping with financial decision-making highlight that females perceive financial decision-making as a traumatic and time-consuming process (Daruvala, 2007; Luo and Salterio, 2022; Kaur and Vohra, 2012; Carr and Steele, 2010; Bottazzi and Lusardi, 2021; Bacha and Azouzi, 2019).…”

“…More specifically, gender stereotyping/gender differences have often been well-documented and imply that female counterparts are more risk averse than their male counterparts when making decisions and are less competent in statistical calculations and finance than men, which contributes to underrepresentation of female counterparts in financial decision-making (Bottazzi and Lusardi, 2021; Luo and Salterio, 2022). Several studies linking gender stereotyping with financial decision-making highlight that females perceive financial decision-making as a traumatic and time-consuming process (Daruvala, 2007; Luo and Salterio, 2022; Kaur and Vohra, 2012; Carr and Steele, 2010; Bottazzi and Lusardi, 2021; Bacha and Azouzi, 2019). In line with this, Goyal and Kumar (2021) conducted a bibliographic analysis of 175 studies and found that financial literacy among female consumers, financial inclusion and gender differences were some of the major themes that were investigated in the field of financial decision-making.…”

Effects of Investment Experience on the Stock Investment Task: The Mediating Role of Risk Perception

“…Since traditional financial methods are exclusively reliant on analyzing the historical trading data of the stock market (e.g., investors' stock age and cumulative number of stocks traded) [13][14][15], it is hard for researchers to isolate the independent contributions of investment experience and control the irrelevant variables such as gender, risk tolerance, emotion, age, financial literacy, etc. [16][17][18][19][20]. Numerous confounding variables will covariate with the variables of interest, obscuring the interested effects [21][22][23].…”