Interaction and decomposition of gender difference in financial risk perception

Previous literature suggests males tend to perceive lower risks than females. We revisit this gender difference by studying the interaction of gender with other observable characteristics in a survey of forecasting future stock prices. We find that some observable characteristics such as culture, age, and uncertainty of stock prices have a different effect on the risk perception between females and males. This additional source (“coefficient effects”) of gender difference is distinct from the differences in personal characteristics (“characteristics effects”). We disentangle these two sources of gender differences in risk perception by applying the Blinder–Oaxaca decomposition technique. We find that characteristics effects and coefficient effects are both important, and the latter can be even more important than the former.