Is it a boy or a girl? Newborn gender and household portfolio decisions

• Published date: 01 September 2024
• Author: Francesca Arnaboldi,Elena Beccalli,Francesca Gioia
• Date: 01 September 2024
• DOI: http://doi.org/10.1111/eufm.12469

DOI: 10.1111/eufm.12469

ORIGINAL ARTICLE

Is it a boy or a girl? Newborn gender and

household portfolio decisions

Francesca Arnaboldi

1,2

|Elena Beccalli

3

|Francesca Gioia

1

1

Dipartimento di Scienze Giuridiche

Cesare Beccaria, Università degli Studi di

Milano, Milano, Italy

2

CEFIN, Università degli Studi di

Modena e Reggio Emilia, Modena, Italy

3

Dipartimento di Scienze dell'economia e

della gestione aziendale, Università

Cattolica del Sacro Cuore, Milano, Italy

Correspondence

Elena Beccalli, Università Cattolica del

Sacro Cuore, Largo A. Gemelli, 1, Milano

20123, Italy.

Email: elena.beccalli@unicatt.it

Abstract

This paper analyzes the role of newborn gender in

household investment decisions. Parenting a new

baby is associated with a reduction of the share of

financial wealth held as cash and an increase in

risky investments. The reallocation is however

gender‐heterogeneous: the increase in the share of

both total and financial wealth allocated to risky

assets when parenting girls is reduced for house-

holds parenting boys. The effect is driven by the first

child. Parents of newborn girls hold riskier portfo-

lios because they make financial decisions influ-

enced by their expectations on the autonomy and

financial independence of newborns in adulthood.

KEYWORDS

gender, household savings, investment choice, investment

decision, newborns

JEL CLASSIFICATION

G11, D14

Eur Financ Manag. 2024;30:2095–2134. wileyonlinelibrary.com/journal/eufm

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This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and

reproduction in any medium, provided the original work is properly cited.

© 2023 The Authors. European Financial Management published by John Wiley & Sons Ltd.

We thank John Doukas (Editor) and an anonymous referee for valuable suggestions. We would also like to thank

participants to the 2021 Financial Management Association (FMA) Virtual European Conference and the 36th National

Conference of Labour Economics (AIEL).

1|INTRODUCTION

The investment behaviour of households is often inconsistent with the optimal behaviour

predicted by normative models. Household suboptimal choices in the use of financial markets

may be explained by mistakes, due for example to low financial education (Lusardi &

Mitchell 2007,2014; van Rooij et al., 2011), by preferences concerning decision‐making under

risk (Calvet & Sodini, 2014; Guiso et al., 2008) or by systematic behavioural biases, such as the

tendency to shun the stock market, hold domestic equities, stick with the status quo potentially

ignoring profitable investment opportunities or hold underdiversified portfolios (Calvet

et al., 2007; Campbell, 2006; Cocco et al., 2005; Guiso & Sodini, 2012).

From a policy perspective, it is important to understand household financial choices in investing

as they have a direct impact on family economic conditions and opportunities, affect resources

available for children's care and education and may influence their later professional choices. Early

and systemic policy interventions, particularly in the education systems, and in financial education,

but also those aimed at changing cultural norms and tackling stereotypes, are crucial to address the

determinants of a household's ability to follow standard financial theory when they have a new baby

and avoid the influence of offspring gender being further accentuated as the children grow up.

This paper contributes to the understanding of the determinants of the ability of households

to follow the precepts of standard financial theory by investigating the effect of offspring gender

on household financial decision‐making. Specifically, we ask whether the gender of newborns

affects the share of financial wealth held in several asset categories. We answer this question

using data from Italy in the period 2006–2016. Our evidence suggests that households with

newborn girls hold riskier portfolios, resulting in a net difference in allocations by gender. Our

interpretation is that parents make their financial decisions under the influence of their

expectations on the role of sons and daughters in adulthood.

Gender‐driven considerations affect several aspects of life. Gender discrimination in hiring

has been alleged for many occupations. For example, in symphony orchestras, the blind

audition procedure fostered impartiality in hiring and increased the proportion of women in

orchestras (Goldin & Rouse, 2000). Recent evidence suggests that the gender dimension also

influences earnings (Price, 2012). Although women's participation in the top executive ranks

recently increased, their earnings did not increase accordingly and female top managers still

face a pay gap in listed companies (Bertrand & Hallock, 2001). In fact, the gender pay gap also

affects lawyers, university faculty, engineers and physicians, among others (Baker, 1996;

Gander, 1997; Morgan, 1998; Wood et al., 1993).

There is also some indirect evidence from recent work in finance that highlights gender

differences. The 2018 report for the 2020WOB shows that half of the companies in the Russell

3000 Index have one or no women on their boards.

1

Women are also underepresented on

boards in STEM and finance industries (Adams & Kirchmaier, 2016).

2

Venture capital firms

hire few female partners although greater gender diversity improves deal and fund

performances (Gompers & Wang, 2017a,2017b). Female‐led small‐and medium‐sized

enterprises are more likely than their male counterparts to refrain from applying for loans

(Galli et al., 2020). Similar evidence has been found in the mutual fund industry where female

1

https://www.2020wob.com/sites/default/files/2020WOB_GDI_Report_2018_FINAL.pdf.

2

Other papers study the role of the gender composition of corporate boards. See, among the others, Arnaboldi et al.

(2020), Bøhren and Staubo (2016) and Li and Zhang (2019).

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managers receive fewer funds and are less likely to be promoted than male fund managers

(Barber et al., 2017; Niessen‐Ruenzi & Ruenzi, 2019).

Aside from affecting behaviour in the workplace, also household behaviour is influenced by

the gender dimension. Specifically, economic and applied psychology research has found that

parental gender bias influences the economic condition of the family. In disadvantaged

families, fathers of sons support their families more than fathers of daughters (Garcia

et al., 2018). A firstborn son is significantly more likely to be living with his father, compared

with a firstborn daughter, and this has consequences for children: firstborn son families have

higher income and lower poverty rates (Dahl & Moretti, 2008). In addition, parents exhibit

systematic biases when forced to choose between spending on sons and daughters. Mothers

consistently favour daughters, whereas fathers, who are usually the higher income earners and

responsible for family investment decisions, consistently favour sons (Nikiforidis et al., 2018).

While a significant literature exists in finance that investigates potential determinants for

household investment behaviour, this literature has not focused on understanding the impact of

newborn gender on the ability of households to follow the precepts of standard financial theory.

There are few recent studies on the role played by family composition in household financial

decisions, Love (2010) highlights the fundamental role of children in household portfolio choice

(see also Li et al., 2020; Niu et al., 2020; Wu & Zhao, 2020). The paper that is closest in spirit to

our work is Bogan (2013). The author uses US data from the National Longitudinal Survey of

Youth 1979 to test the hypothesis that stockholding and bondholding decisions are influenced by

offspring gender. She finds that offspring gender is associated with parental stockholding. In

particular, married respondents with only female children have a higher probability of holding

stock (risky assets) while having only male children increases the probability of holding stock for

single females.We extend her research by lookingat another country and using panelrather than

cross‐sectional data to identify changes in portfolio weights after a male versus female child is

born. Also, we consider a larger array of financial and physical assets.

Household finance literature attributes deviation from normative models in portfolio

allocation to three determinants: preferences concerning decision‐making under risk,

information regarding financial concepts and socioeconomic status (Brown et al., 2021;

Dimmock & Kouwenberg, 2010; Kuhnen & Miu, 2017). According to the first determinant,

household investment choices are often inconsistent with the standard allocation model

because they are related to risk aversion (Andersen et al., 2019; Barasinska et al., 2012; Guiso &

Paiella, 2008; Iezzi, 2008), ambiguity aversion (Dimmock et al., 2016), uncertainty (Foldes, 2000;

Heaton & Lucas, 2000) and inertia (Brunnermeier & Nagel, 2008). In addition, unsophisticated

investors, possessing lower information on financial concepts and households with lower stock

market competence retrench from investing in stocks and hold underdiversified portfolios

(Dimmock et al., 2016; Kacperczyka et al., 2019; van Rooij et al., 2011). Finally, the

socioeconomic status explanation suggests that household investment decisions relate to

several demographic characteristics, personality traits, nonstandard preferences, income and

financial wealth. Health, age, race, gender and marital status explain differences in individual

portfolio composition (Bertaut & Starr‐McCluer, 2002; Carroll, 2002; Rosen & Wu, 2004).

Household socioeconomic background is also related to the way they learn from new financial

information and use it to make investment decisions (Kuhnen & Miu, 2017).

In this paper we take advantage of the birth of a child as a natural experiment to examine

whether newborn gender influences household investment behaviour. It could be claimed that

the decision to have a child is not entirely exogenous, thus there may be unobserved variables

that affect both such decision and investment choices. First, this may be true for the decision to

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