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• Are Men Better Investors Than Women?
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The Market Guy can now be reached at mail@marketguy.ca. Accept no substitutes.

Are Men Better Investors Than Women?

The other day, the Market Gal and I were grocery shopping and came upon the periodicals rack. I was looking at the sports magazines, while she was making fun of two covers: one featuring very few of Shania Twain’s clothes, another featuring a whole lot of Jewel’s breasts. While I quickly re-evaluated my browsing choices, she noticed another cover and said, “Hey there’s that Buffett investor guy you’re always talking about.” I looked and couldn’t find any pictures of Warren Buffett, the world’s most successful investor. Pointing, she said, “it’s right there!” Finally I found the cover she was talking about. It was a picture of Jimmy Buffett, singer of Margaritaville. I’m not trying to poke fun at the Market Gal (well, maybe just a little) but like most couples, we each have areas of expertise that sometimes fail to overlap.

Within my circle of friends, the overwhelming numbers of those interested in the markets are guys. Perhaps this gender breakdown mirrors the world of finance. Since I’m a geek, I have a habit of turning my everyday experiences into research questions. After grocery shopping, I decided to revisit the subject of gender and investing in order to determine if men are more successful investors than women.

What do the media have to say on this issue? This is certainly relevant, as the media plays a powerful role not only in presenting a version of reality, but in creating that very reality. In 1996, I conducted a study titled, The Social Construction of a Stock Market Crash: A Discourse Analysis. By examining media accounts of the 1987 stock market crash, I noted that the financial press characterizes female investors in passive terms, emphasizing dependence and a lack of financial knowledge. In contrast, males are depicted in active terms that stress independence and market savvy. It never hurts to have the mass media in your corner.

Advantage: Give this one to the guys.

Let’s narrow our focus to real investors and what they actually bring to the table. In a study conducted to determine if personality differences existed between successful and unsuccessful investors, Baker (1971) administered a series of personality tests to his subjects. The personality characteristics associated with successful investing were flexibility, tolerance, psychological mindedness, self-acceptance, sense of well-being, and intellectual efficiency. Overall, these personality characteristics were more representative of the women in the study than of the men. Chalk one up for the ladies.

Advantage: Women

Knowing a little something about investor personality only gets us so far. We need some information as to what people actually believe and do. Lewellen, Lease, and Schlarbaum (1977) analyzed the brokerage records of 972 individual investors. They noted that men rely less on their brokers for information, conduct more transactions, believe that returns are more highly predictable, anticipate higher possible returns, and spend more time and money on security analysis than do women. The point that men rely less on brokers may reasonably indicate a sense of confidence in their investing ability. Why do I need to pay someone to tell me what I can figure out for myself, right? But are men actually more confident?

Enter Estes and Hosseini (1988), creators of a study on investment decision-making and investor confidence. It was discovered that women do in fact express significantly lower levels of investor confidence than men. This was the case even when age, business experience, credit hours in accounting and finance courses, investment experience, and knowledge of common stocks were statistically controlled. Even when men and women were found to make the exact same investment decision, the female investor exhibited lower levels of confidence. According to Estes and Hosseini (1988), women are often perceived as lacking the financial acumen to invest successfully, and therefore do so less confidently. However, in their study, females invested at a success rate equal to that of men. This finding speaks volumes.

Advantage: Toss-up.

Good research offers more questions than answers. Thank goodness for Barber and Odean (2001) and their study, Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment. They reiterate the finding that in areas such as finance, men are more overconfident than women. However, they offer the assertion that overconfidence leads to more trading and the more you trade, the less you make. They examined the account data for 35 000 households from a large discount brokerage and poured over the common stock investments for men and women between 1991 and 1997. That’s some study. It was revealed that men trade more excessively than women. In fact, men make 45% more trades than women. How does this influence performance? Trading reduced men’s returns by 2.65% a year as opposed to 1.72% for women. It was also noted that single men trade 67% more than single women, further compromising investment returns. The authors noted that married people influence each other’s investment decisions are thereby reduce the gender differences in overconfidence.

Advantage: Married folk

But people don’t always invest as individuals or as couples. Harrington (1999) analyzed the performance of investment clubs and noted that clubs made up of men and women together earn higher returns on their stock portfolios than clubs made up of men only or women only. No differences emerged between male only and women only clubs. The performance differential was attributed to the fact that members of mixed-clubs are more willing to debate investment ideas and buy-sell decisions. In contrast, same-gender groups strive for agreement and discourage alternative points of view. Mixed-gender groups usually consist of co-workers, while same-gender groups consist of close friendships.

Final Advantage: Mixed-gender investment clubs for married people?

Do these things actually exist? How can we get in on such a thing? Wait a minute. I don’t think the Market Gal would be interested. Instead, I think I’ll go buy Margaritaville.

Market Guy Trading Note: Enerplus Resources Fund

Same ground rules as before. I’m not a professional advisor. I’m just a guy who loves investing and talking about the markets. With that said…Last week on price appreciation, the position in Enerplus Resources Fund (ERF.UN) was eliminated at $33.86. It was a challenge to sell, as the stock was part of the portfolio for many, many years. I still love the company, production mix, reserve life, conservative management, outstanding monthly distributions, and overall financials. However, the stock has experienced a remarkable short-term advance, worth taking advantage of. We’ll talk more about investment trusts later on…believe me!

The Market Guy is an instructor with the Department of Psychology at Carleton University. This past weekend, he continued to struggle with a pesky lawn grub problem. Your stories and comments are welcome atmail@marketguy.ca