Are female investors more risk-averse than men? Or is this just another case of gender stereotyping?

Women investors are heavily unappreciated. According to the Harvard Business Review, companies founded solely by women receive less than 3% of venture capital investment. That 'the weaker sex' still loses out against the old boys' network is attributed to several reasons. Men mainly attract other men, while women put cracks in the glass ceiling with a united force. In reality, the cause of the gender investment gap lies in a combination of historical, cultural, institutional, and psychological factors. But how do discussions about female investors keep arriving at the same point anyway? Are female investors more risk-averse than their male counterparts? Let's dive into the matter.

Is it a man's world??

Several studies have been conducted in recent years on investors' risk appetite and the difference between male and female investors. For instance, Byrnes, Miller, and Schafer (1999), Powel and Ansic (1997), and Niessen and Ruenzi (2007) concluded that women are more risk-averse than men in the studies. Coincidentally, most of these studies were conducted by men. One of the most certain female researchers points out a bright spot: "Because strategies are more easily observed than either risk preference or outcomes in day-to-day decisions, strategy differences may reinforce stereotypical beliefs that females are less able financial managers."?

Of course, considering that most studies in this area were conducted in the previous millennium, it is not strange that gender stereotyping may be guiding the outcome of research findings. Johnson and Powell (1994), therefore, made a valuable comment on their research. They write that discrimination against women is the basis of the stereotype, that is, "Through presupposing that women do not take enough risk to yield high returns, companies provide less opportunities for their accessing to promotions compared to men."

Female investors are more successful than male investors

Now that we have touched on all the highly outdated and stereotypical studies, it is time to examine the current situation. Because what is the case anno 2023 really like? Well, little progress on many fronts, but that doesn't make it any less newsworthy. According to Fidelity, the number of women investors has risen from 44% in 2018 to 67% in 2021, but only half of these women consider themselves investors. Women are insecure about their position when they are just making impactful results. They tend to label the stock market as 'too risky,' feel more anxious about their investments than men and are more likely to say they have no idea how investing works. And despite women investors' perception of women as risk-averse, they achieved a 0.4% higher return than men's.

Risk aversion tends to be portrayed in studies as a negative trait and attributed to the female gender in particular. This while other factors such as age, character, education, and personal financial situation also influence the investor's risk appetite - male or female. If you let female researchers do the task, gender-based investment habits are likely to be flown into the 50s, where they belong. Risk aversion will be interpreted differently, allowing the higher returns of female investors to be scientifically assigned to character traits rather than the gender stamp on them.

Latest musings on the gender investment gap

It would be nice to replace that corny image of women with a professional description in the proper context. That risk aversion transforms into a measured approach based on thorough research, resulting in sustainable returns. And then that old boy's network, which exists according to Harvard research, may give way to a new generation of women investors. Some people like to take risks, and others don't. Others make thoughtful decisions and are just really good at investing. And those others are women.