Testosterone Affects Financial Risk Taking, Study Finds

The differences between men and women have long been the topic of Venus-and-Mars themed relationship books and staples of comedians' routines. Lately, they've also been popping up in b-school related news.

Last week, I wrote about a new study finding that women tend to underestimate the performance reviews given by their superiors, colleagues and employees, whereas men more often overestimate their rankings. This week, a widely reported news story claims that women with higher levels of testosterone take bigger financial risks, a characteristic more often associated with men.

The research behind the headline was conducted by Paola Sapienza, an associate professor at Northwestern University's Kellogg School of Management; Luigi Zingales, a professor at the University of Chicago's Booth School of Business; and Dario Maestripieri, a University of Chicago comparative human development professor.

The title of their report says it all: "Gender Differences in Financial Risk Aversion and Career Choices are Affected by Testosterone." It was published in the Proceedings of the National Academy of Science and is notable for being the first study that looks at how testosterone affects financial risk taking.

In general, men take more chances in their financial lives than women do. In the researchers' sample set of MBA graduates, 57 percent of the males had higher risk jobs, such as trading and investment banking, compared with only 36 percent of female participants. The researchers set out to discover whether or not this was related to testosterone.

The researchers put participants in simulated situations that tested their tolerance for financial risk. They found that higher levels of testosterone in women equaled greater risk-taking behaviors. If a woman's level of testosterone was similar to a man's, the gap in risk taking disappeared.

"This study has significant implications for how the effects of testosterone could impact actual risk taking in financial markets, because many of these students will go on to become major players in the financial world," said Zingales in a press release. "Furthermore, it could shed some light on gender differences in career choices. Future studies should further explore the mechanisms through which testosterone affects the brain."

Image courtesy of Wikimedia Commons.