Why Men and Women Differ in Financial Decision-Making

Jan 11, 2011    |    My Money MD     |   Shirley M. Mueller, MD

Men and women approach making financial decisions differently. That much is widely documented. For example, one study showed that if a large number of 401(k) investment fund options are offered, fewer women participate than men.  (I wrote about this phenomenon in a previous post.) On the other hand, if the retirement plan’s selection of funds is small, more women tend to participate than men.  This tantalizing diversity begs the question, “What is going on here?  Why are the sexes different when they analyze investment options?”  

The reasons behind gender divergence are just beginning to be revealed.  Senior author Daniel Tranel and co-authors report that there is a hemispheric sex-related asymmetry in financial decision-making.  Their article is about to be published in the journal Neuropsychologia.

Though the experiment is complex, it is worth examining.  The researcher’s investigation was unique in that it involved patients with brain impairments rather than healthy study participants. The patients had amygdala and ventromedial posterior cortex (VMPC) lesions.  Damage to the amygdala has been found to decrease autonomic reactions to stressful and emotional stimulus. The authors state that the injury impairs “the emotional response to learned complex, cognitive information.”  It is the learning that involuntarily elicits an emotional response.

The VMPC, on the other hand, links memory and emotional systems.  If it is damaged, the patient will fail certain financial tests, in part because he or she can’t recreate earlier bodily sensations that told the individual a mistake had been made.  This awareness is tested by the skin conductance response, a way to measure a reaction to stress.  Recognized failure of an appropriate financial choice is one way to induce a reaction, because it initiates an unconscious stress response in a normal person. This response does not occur in a VMPC-damaged patient.

Read more at: http://www.hcplive.com/physicians-money-digest/columns/my-money-md/01-2011/-Why-Men-and-Women-Differ-in-Financial-Decision-Making#sthash.qmaMykCs.dpuf

Collecting and Gender

Why Women Invest Differently than Men

“Many people perceive a style difference as the other person’s personal failing.”
—Deborah Tannen

Our financial choices, like many other decisions, are rooted in our neurobiology. And the neurobiology of a woman’s brains is somewhat different than a man’s due to phylogenetic history. This means that by looking back to our distant ancestors we can better understand why women and men tend to make the investment choices they do.  

Our prehistoric grandparents wanted to survive just like we do today. In order to achieve this, they had to use every skill she/he could muster to stay alive in a threatening and often hostile environment. Along the way, each developed life protective skills that were gender specific and are still carried in our genetic makeup today. 

Our prehistoric grandmother had to protect herself so she wouldn’t be killed. Since she was the physically weaker sex, this involved caution. Otherwise, a strong male from another group might carry her off, or an animal might enjoy her for lunch. Genetic selection for caution meant she was more likely to live and procreate. Her stronger male counterpart, on the other hand, had to develop the confidence and aggressiveness to kill animals and other humans or he wouldn’t survive and his genetic pool would die. 

Also, just like women today, our great, great, etc. grandmother wanted to be as comfortable as possible. This involved cooperation and communication with other females to use common utensils and tools for making a home. Talk/listen was the process she used. Without this skill, she would more or less be on her own, and again more likely end up as prey for a predator.  Males, on the other hand, developed their action-based skills, since this was needed for killing animals for food and other humans to protect their group. Rather than discuss whether to kill a foe, it was killed upon sight. Action had to be taken. If not, our cave-grandfather was the victim, not the victor.

Additionally, our great, great, etc. grandmother had to look ahead to her future. Which male would she align herself with who could give her and her potential children protection? Which group members were trustworthy allies? Thinking ahead and seeing her future in perspective meant she saw the overall goals for her survival, the long-term picture. He, on the other hand, had to be more focused on short-term goals in order to supply the group with food and protect them. Also, because he was powerful, he could conquer his female of choice and was less likely to calculate ways to attract her. 

Read more at: http://www.hcplive.com/physicians-money-digest/columns/my-money-md/05-2008/investing-and-gender#sthash.yRHudWhZ.dpuf

Gender, Decisions and Outcomes: Improving Return

Apr 14, 2009    |    My Money MD     |   By Shirley M. Mueller

Women and men make investing decisions the same, but also different. It is the dissimilarities that lead to unlike outcomes. For example, men trade stock more than women and thereby made less money because of trading costs. The authors, Barber and Odean, postulated that this was due to overconfidence on the part of the male participants (compared to female). Men thought they could pick more winners than losers, but when the cost of trading was figured in they didn’t. Instead, they lost money.   

Women are not so daring. They tend to be less confident and risk adverse rather than seeking. This is confirmed by several studies that show they invest their retirement assets more conservatively than men. When the market drops unexpectedly as it recently did, that can only be good. Of course, the reverse is also true.

A key question is why the sexes make different choices. If we knew that, perhaps we could find a way to use that knowledge to improve decision making and thereby attenuate or prevent financial disasters going forward.

Daniel Tranel and Antoine Bechara published a paper last month in the journal, Neurocase that addresses this issue. It is entitled “Sex-related functional asymmetry of the amygdala: preliminary evidence using a case-matched lesion approach” (http://www.informaworld.com/smpp/content~db=all?content=10.1080/13554790902775492) Tranel is in the Division of Behavioral Neurology and Cognitive Neuroscience at the University Of Iowa College Of Medicine in Iowa City, Iowa. Bechara is in the Brain and Creativity Institute & Department of Psychology at the University of South California, Los Angeles. They studied decision-making as well as social conduct, emotional processing and personality in male and females that had amygdala damage. They found support for the concept that there is a sex-related functional asymmetry of the amygdala. Left sided damage led to female, but not male dysfunction. The reverse was also true.  

This is interesting because of the important role of the amygdala. It triggers non-conscious emotion that is needed for arousing a specific portion of the prefrontal cortex to take action in making judgments of right or wrong. The prefrontal cortex is the executive decision making part of the brain. It is the ventro-medial prefrontal cortex (VMPC) portion that designates moral judgment important. In an earlier paper, the authors found that the VMPC was more important on different sides of the brains in each sex. Interestingly, the side correlated with the findings in the amygdala study. In women, the left amygdala and VMPC were more important and in men it was just the opposite. The authors postulate that this could be because it was phylogenetically advantageous for men to have emotional process tied to the visual-spatial system (right sided) and for women to have it coupled to the verbal (left sided). This is because hundreds of thousands of years ago, as the brain was evolving, men needed hunting skills that depended primarily on nonverbal processes. Women, on the other hand, required speech to negotiate with others (crucial to their survival since they were the weaker sex) and teach their offspring.  

Read more at: http://www.hcplive.com/physicians-money-digest/columns/my-money-md/04-2009/Gender-Decisions#sthash.lx5f8uwo.dpuf

Gender and Art Appreciation: Sex Makes a Difference

 My Money MD    |   Shirley Mueller, MD

Beauty is in the eyes of the beholder. Men and women generally are drawn to dissimilar styles of paintings. A man’s preference is on the left (illustration from Wikipedia) and a woman’s is on the right (illustration from Happy Painting). 

In behavioral studies, men and women are known to rate the beauty of artistic and decorative stimuli in different ways. Although this tendency is recognized, the reason why is not. Recently, Camilo J. Cela-Conde and his colleagues began to explore the answer to this question. This is what they found.

During visual artistic appreciation, a particular area of the brain, the parietal lobe, was stimulated in both sexes. However, the sides of the brain that displayed activity in the 2 sexes were not the same. In females, it was on both sides and in men, it was primarily the right. The authors explained, “Our results showing an early activity of parietal areas for stimuli rated as beautiful in both sexes seem to indicate that the processing of spatial relations is crucial in the human appreciation of beauty. However … activity in the parietal regions is bilateral in the case of women but lateralized to the right hemisphere in the case of men.” 

Figure 2 from the paper showing the subject’s brain response to stimuli rated as beautiful rather than not beautiful. Women (on the left) showed primarily bilateral brain response to visual stimuli at several millisecond stages compared to unilateral for men.

To reach their conclusion, the researchers studied 10 female and ten male neurobiology students. Their average age was 23.6 years. They had no earlier training or special interest in art. All were shown the same set of photographs of artistic paintings or natural objects that were divided into 5 clusters. There were 50 pictures each for the first 4:  abstract, classic, impressionist, and postimpressionist art. The final group consisted of 200 photographs of landscapes, artifacts, urban scenes, and similar.

Magnetoencephalography (MEG) was used to record brain activity and appropriate data analysis was applied. MEG is a method for detecting changes in magnetic fields produced by postsynaptic neuron activity with a time resolution of milliseconds. For more detail, please see the paper. 

Read more at: http://www.hcplive.com/physicians-money-digest/columns/my-money-md/02-2015/Gender-and-Art-AppreciationSex-Makes-a-Difference#sthash.e87cP49K.dpuf