Maybe the Academy Award-nominated film Wolf of Wall Street that depicted the seedy, greedy male-dominated world of finance has triggered all the recent banter about whether men or women make better investors.
While everybody has an opinion, hard research has sorted out a wide range of differences in investor behavior by gender, with many studies citing similar results. Quantifiable research on returns is just the start.
The cornerstone study by Brad Barber and Terrance Odean involved 35,000 households from a large discount brokerage. It showed that men trade 45% more than women, to their detriment; it reducing their net returns by 2.65 percentage points per year. Trading by women reduced returns by only 1.72 percentage points. The finance professors are from University of California, Berkeley and University of California, Davis.
Bottom line: Trading less and making more thoughtful investment decisions led to women making more money. Therefore, women rule.
Reasons for the conclusion really have nothing to do with IQ, or level of education, or even years of experience. It all boils down to one, major biological difference: Men produce, on average, 15 times more testosterone than women.
Aside from obvious physical effects of the hormone, it is linked to increased aggression, dominance, confidence, hostility, risk-taking behavior, etc.—which can all explain why John Mars’ book Men Are from Mars, Women Are from Venus sold 50 million copies.
While these traits can present communication gaps between men and women, they can also have big effects on investment decisions, researchers say.
Here are five ways: