Gender differences in financial risk taking: The role of financial literacy and risk tolerance

- Financial risk taking is examined via standard and sophisticated financial investments.
- Standard investment decisions are positively associated with both actual and perceived financial knowledge for men, but only with actual knowledge for women.
- Sophisticated investments increase along with higher perceived financial knowledge, particularly for women.
- Higher risk tolerance relates positively to both standard and sophisticated investments for men, but only to standard investments for women.

We study financial risk taking via standard and sophisticated financial investments. Using survey data on 2047 individuals, we find that standard investments are strongly associated with both actual and perceived financial literacy for men, but only with actual literacy for women. Sophisticated investments, in contrast, are significantly related to perceived financial literacy with an even stronger association for women than for men. Interestingly, there is no relation between risk tolerance and women's sophisticated investments.