Thursday, May 16, 2013
Behavioral Social Neuroscience Seminar
Prenatal Exposure to Testosterone Reduces the Gender Gap in Financial Risk Taking
Henrik Cronqvist, McMahon Family Chair in Corporate Finance and George R. Roberts Fellow; Associate Professor of Financial Economics, Claremont McKenna College, Robert Day School of Economics and Finance
Compared to men, women take fewer financial risks. We test if prenatal testosterone exposure explains this gender gap. Analyzing data from dizygotic twins, we find that, consistent with the testosterone transfer hypothesis, women with male co-twins invest more in risky financial assets. Our findings indicate that the gender gap in financial risk taking reflects biological differences between men and women. Additional analyses suggest these results are better explained by prenatal exposure to testosterone rather than social influences. More broadly, our study shows that prenatal environmental conditions have persistent effects and influence financial decisions much later in life.