Assessing Women's Taste for Risk in the Finance Industry - Building Gender Balanced Business

• So do women really take only reasonable risks rather than the kind of extraordinarily leveraged and default-daring kinds of investments that led to the credit crunch — and the calls for having women play a greater role in the finance industry?

• Sylvia Maxfield, an economics professor at Simmons School of Management in Boston, says no, and she does not mean that as an insult.

• Maxfield, co-author of the study “Risky Business: Busting the Myth of Women as Risk Averse,” writes that “[r]eports of the global-financial crisis are filled with gender stereotypes, associating men with risk-taking and women with caution” — something she calls a “social stereotype”.

• In a Simmons survey of more than 650 female managers, 80% reported having taken significant risks with their personal capital and organizational resources to try to increase their professional standing and income. Such risk-taking was largely gender-neutral. The women relied on fellow professionals instead of family and friends in deciding what risks to take. Oddly, even women say they take fewer risks than they actually do.

• Maxfield takes this all as a license for women to engage in more risky behavior — to essentially take the chance of repeating the errors that have plunged global markets into their worst declines in generations.

• But does her data really apply to the discussion of a more gender-equal finance sector (and business in general)? The women surveyed are already part of the finance sector (and thus probably selected and promoted by men). No one denies that some of the biggest pre-crash risk-takers in finance were women — and they suffered for it.

• In real life, though, women trade stocks less than men on average; they are less confident than men even when the returns are equal (or in women’s favor); and they rely more on outside advice. Maybe not the 650 women the Simmons researchers talked to, but in general, women could bring a dose of calm to markets.

• Finally, in case anyone missed the point, it is not that an all-women desk would necessarily do better (or not worse) than an all-male desk. A balance between the two genders produces the best results. Are we sure? Yes, and among the evidence is a 1999 study of investment clubs found that one balanced between men and women did much better than all-male or all-female clubs.

Sylvia Maxfield’s essay in DiversityInc magazine