A stable, well-functioning financial market for allA stable, well-functioning financial market for allFI Analysis No. 42: Gender differences in investment behaviour
The study confirms previous results showing that women are underrepresented in the stock market. The differences arise as early as three years of age, which shows that adults more often buy stocks for boys than for girls. We also see that men generally have larger stock portfolios than women throughout life, although women increase their stock wealth later in life.
Summary
Financial saving is central to individuals' economic security and long-term goals such as buying a home and retirement. Small differences in returns can over time have a significant impact on wealth and thus on an individual's personal finances. Differences in investment behaviour therefore contribute to inequalities in economic welfare.
There are differences in investment behaviour in many dimensions. The purpose of this analysis is to study the stock market investments of women and men. The analysis focuses on stock investments during different periods of life, the risks individuals take, and the returns they receive. Highlighting these issues is important for Finansinspektionen's (FI) work with financial education and consumer protection.
The study confirms previous results showing that women are underrepresented in the stock market. The differences arise as early as three years of age, which shows that adults more often buy stocks for boys than for girls. We also see that men generally have larger stock portfolios than women throughout life, although women increase their stock wealth later in life.
On average, women have a 0.13 per cent higher return in their stock portfolios than men do. One explanation may be that men tend to trade more opportunistically by trying to time the market, which reduces their returns. However, among the wealthiest individuals, the same gender difference in returns is not observed.
Men take more market risk in their stock portfolios than women do. At the same time, men seem to be better at managing the risk they take by more often diversifying their portfolios by buying different securities. A certain amount of financial risk is not bad in itself. Rather, it is often necessary to take some risk to generate returns on capital. But too much financial risk is not good, as excessive risk can lead to large losses. One of the simplest ways to reduce unnecessary risk-taking is to diversify a stock portfolio by spreading investments across several different stocks.
