Gender effect on financial risk tolereance

Abstract

The concept of risk tolerance represents an important element when shaping and developing financial strategies that meets investors' financial goals. This study aims to examine the relationship between gender and financial risk taking behavior among professionals in Saudi Arabia. Additionally, the study examines if demographic variables namely, age, income, education and marital status interact with gender to determine differences in risk preferences, by investigating the relationship between the 13-item Grable & Lytton psychometrically derived measure of subjective financial risk tolerance and the demographic factors. An independent sample t-test, chi-square test and two-way ANOVA was used to examine the data obtained from 244 professionals in banking and financial sector in Saudi Arabia. The result of this study determined that the influence of gender on financial risk attitudes appears to be insignificant between professionals in Saudi. The results also determined that the demographic factors, age, income, education and marital status does not significantly affect financial risk tolerance among genders. This study indicates that understanding risk tolerance is a complex process that goes beyond the exclusive use of demographic factors. The main implications of this study is regarding the financial advisory industry, where relying primarily on the demographic factors to classify the investors into risk tolerance groups may not be suitable. However, the results of the study are limited due to the sample selection that included only professionals in the financial domain, which restricts the ability of generalizing the results.