Money and Marriage? How Marital Dynamics and Gender Differences in Risk Affect Financial Portfolio Composition Choices

Disagreements over money are widely believed to be one of the leading causes of divorce and separation in the developed world. Hence, it is perhaps unsurprising that examination of transitions in and out of marriages reveal large differences in financial portfolio decisions. Women invest a significantly smaller proportion of their portfolios in stocks when single. In contrast, men tend to significant ly increase their stockholdings when single (e.g., Hinz et al., 1997; Barber and Odean, 2001). However, what remains unclear is how these gender differences manifest themselves in financial portfolio allocations. We examine how portfolio compositions are altered when single individuals transition to marriage, or conversely when married individuals transition to divorce. We ask how varying income levels or sudden income shocks amongst men and women within marriage affect bargaining power and subsequent financial portfolio decisions? Finally, what psychological mechanisms account for these differences in financial risk-taking and changes in bargaining power in marital dyads? We suggest that gender differences in risk, specifically that women are more risk averse while men are risk seeking, can substantially influence how financial portfolios are composed within and out of marriage. We argue that wanting to ensure financial certainty for the future will mediate this gender and safer portfolio choice relationship.