Friday, March 26, 2010

Are Women Better At Investing Than Men?

That was the idea in How Men’s Overconfidence Hurts Them as Investors, from the New York Times, 3-14-10. Here are some interesing exerpts:
"All else being equal, men traded stocks nearly 50 percent more often than women. This added trading drove up the men’s costs and lowered their returns. The economists found that while both sexes reduced net returns through trading, men did so by 0.94 percentage points more per year."

"Selling volatile stocks in a down market — as male I.R.A. investors did more often than women, according to the Vanguard data — might seem to protect a portfolio. But that isn’t necessarily so. Selling before the market falls and buying after it falls is the smart move. For long-term investors, though, the best strategy may be to ignore short-term market movements (perhaps rebalancing a diversified portfolio every so often)."

"Gender differences appear to extend to other financial behavior. For example, women who are C.E.O.’s and company directors tend to pay a lower premium in corporate takeovers, saving their shareholders a bundle..."

"Researchers have found that activating the nucleus accumbens — a brain region that is stimulated when you eat delicious food or look at an attractive person — can affect financial risk-taking. When young Stanford men were shown pictures of partially clothed men and women kissing, he said, that region of their brains was activated. And when they were then given financial tests, the men became more likely to “make high-risk gambles.” Women didn’t respond much to the same pictures..."

"Others studying the effects of hormones on financial behavior have found correlations between testosterone and risk-taking."

"It’s also possible...that evolutionary psychology accounts for some of them. Before the dawn of history, aggressive risk-taking might have given men an advantage in finding mates, she said, while women might have become more risk-averse to protect their offspring."

I have had posts on related topics before. They were:

Can Testosterone Help Women Earn More Money?

Male sex hormone may affect stock trades

I also had a post on how genes can affect the way you invest. See

Is Your Investing Personality in Your DNA?

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