Effects Of Gender And Age On Risk Preferences
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Date
2016-04
Authors
Tan, Scaik Lin
Journal Title
Journal ISSN
Volume Title
Publisher
Universiti Sains Malaysia
Abstract
Women are commonly stereotyped as more risk averse than men in financial decision. Young age group are believed to be more willing to take more risk than elder age group. The present study intended to look into the effects of gender and age on risk preference. This study explained why a subject behaved as risk taker or risk averse in risk decision through three aspects, certainty equivalent; Probability Weighting Function; and Value Function. By looking on how a subject evaluated probability, we knew his or her risk behavior through the underweighting or overweighing of probability. Payoff valuation helped us to determine whether a subject valued a payoff higher or lower than the expected payoff. The study conducted a field study by recruiting working adults from different gender and different age groups. They were asked to make decision on lotteries and the data collected were used to estimate and plot Probability Weighting Functions and Value Functions. The findings showed that women were more risk averse than men as they overweighed small probabilities less (more) and underweighted large probabilities more (less) than men in gain (loss) domain. At the same time, elder adults were found to be more risk averse in gain domain but more risk seeking than young adults in loss domain.
Description
Keywords
Gender , Financial decision