CHICAGO (Aug. 24, 2009) – The battle of the sexes rages on, this time from the trading floor. While there has long been debate about the social and biological differences between men and women, new research by the Kellogg School of Management at Northwestern University, the University of Chicago Booth School of Business and the University of Chicago's Department of Comparative Human Development explores how the hormone testosterone plays an important role in gender differences in financial risk aversion and career choice.
Prior research has shown that testosterone enhances competitiveness and dominance, reduces fear, and is associated with risky behaviors like gambling and alcohol use. However, until now, the impact of testosterone on gender differences in financial risk-taking has not been explored.
The new paper, "Gender differences in financial risk aversion and career choices are affected by testosterone," has been published in the Aug. 24, 2009 early edition of the Proceedings of the National Academy of Sciences (PNAS). The research was conducted by Paola Sapienza, Associate Professor, Kellogg School of Management at Northwestern University; Luigi Zingales, Robert McCormick Professor, University of Chicago Booth School of Business; and Dario Maestripieri, Professor in Comparative Human Development, University of Chicago.
"In general, women are more risk averse than men when it comes to making important financial decisions, which in turn can affect their career choices," said Sapienza. "For example, in our sample set, 36 percent of female MBA students chose high-risk financial careers such as investment banking or trading, compared to 57 percent of male students. We wanted to explore whether these gender differences are related to testosterone, which men have, on average, in higher concentrations than women."
It all comes down to the testosterone baby.
The researchers, using an economic-based measure of risk aversion, found that higher levels of testosterone were associated with a greater appetite for risk in women, but not among men. However, in men and women with similar levels of testosterone, the gender difference in risk aversion disappeared. Additionally, the researchers reported that the link between risk aversion and testosterone predicted career choices after graduation: individuals who were high in testosterone and low in risk aversion chose riskier careers in finance.
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