'T' Factor: Why Women Go For Risky Finance

By M H Ahssan

A new study has found that women with higher levels of testosterone are more likely to take financial risks

Women with high testosterone levels are likelier to have a special appetite for risk that may drive them towards high-risk financial careers, new research suggests.

The study by US scientists links testosterone to gender differences in aversion to financial risks, and adds fresh evidence for the idea that differences in testosterone can influence career choices.

The researchers from the University of Chicago and Northwestern University say their findings also explain a long-standing observation by management schools — more male MBA students opt for high-risk finance careers such as investment banking than female MBA students. The study’s findings appeared in the Proceedings of the National Academy of Sciences on Monday.

Previous studies have shown that testosterone is associated with high-risk behaviour, such as gambling and antisocial activity, among men. The hormone appears to increase motivation for competition and to reduce fear.

“This is the first study to show that gender differences in financial risk aversion can be explained on the basis of this hormone,” said Dario Maestripieri, a team member and professor of comparative human development at the University of Chicago.

The researchers said at their institutions, 57 per cent of male MBA students pursue a risky career in finance while only 36 per cent of female MBA students do so.

The study examined salivary testosterone levels in 381 male MBA students and 169 female MBA students who were asked to play a computer game designed to evaluate risk aversion — they had to choose between a lottery with a high payout amount or a guaranteed monetary award. In men and women with similar levels of testosterone, there were no differences in risk aversion.

Students with high testosterone levels chose riskier finance careers. “There could be other factors that also influence career choices — but testosterone in both men and women appears to increase risk-taking,” Maestripieri told The Telegraph.

The researchers caution that while the study bolsters the connection between testosterone and risk aversion, it is possible the hormone levels are not exclusively determined by biology. “Testosterone levels in an individual may be determined by both biology and the environment,” said Luigi Zingales, professor at the University of Chicago Booth School of Business.

The study, for instance, found that married men and women had lower levels of testosterone than unmarried men and women. This appears consistent with the idea that married persons are more risk averse than unmarried persons.

The study has also shown that the relationship between testosterone and risk aversion is stronger in women than in men. Zingales said this could be the result of two possibilities — either testosterone affects the male and female brains in different ways or its effect is non-linear.