‘Bro’ Subculture Spurs Financial Risk-Taking

SMITH BRAIN TRUST — Men getting in touch with their masculine selves — like in Wall Street’s male-dominated, competitive culture — breeds overconfidence and financial risk-taking, new research from the University of Maryland’s Robert H. Smith School of Business finds. “The salience of male identity increases men's beliefs of experiencing good outcomes in a game of chance,” says the author, Smith School finance professor Francesco D’Acunto. “Inducing overconfidence similarly makes men take on more risk and invest more.”

D’Acunto says the effect is even stronger for older men. This, he adds, is “consistent with the notion that gender identity stereotypes have become less stark over the last decades.”

In a set of experiments, D’Acunto tested his subjects for risk tolerance through a gambling-based task before and after each person read about “masculinity.” The male subjects became substantially more risk tolerant, while their female counterparts were unchanged. The outcome was essentially the same when D’Acunto had his subjects concentrate on concepts commonly linked to masculine identity — like power or control. 

A recent Bloomberg News review of D’Acunto’s work suggests “trading firms might want to avoid a ‘bro’ culture” and that “individual investors might want to be wary of financial media websites that promote a hyper-masculine image.” Men in groups tend to show off, the author of a separate, related study told The Wall Street Journal last week. They egg one another on to display the “cultural norm of male daring.”

D’Acunto says his results also “provide a rationale for marketing campaigns that exploit male and overconfidence cues to increase the take-up rates of risky products by consumers.” His paper, Identity, Overconfidence, and Investment Decisions, drew a 2015 Cubist Systematic Strategies PhD Award for Outstanding Research from the Western Finance Association.

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