Gender, Overconfidence, and Common Stock Investment

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The study, "Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment" by professors Brad M. Barber and Terrance Odean at UC Davis, found that men trade stocks 45% more than women, and this reduces their net returns by 2.65 percentage points a year, as opposed to 1.72 percentage points for women.

Here are some interesting conclusions from the study:

"Psychological research has established that men are more prone to overconfidence than women, particularly so in male dominated realms such as finance … they may even trade when the true expected net gains are negative. Models of investor overconfidence predict that, since men are more overconfident than women, men will trade more and perform worse than women."

"Our empirical tests provide strong support for the behavioral finance model. Men trade more than women and thereby reduce their returns more so than do women."

The study can be found here.

The information provided here is intended to help you understand the general issue and does not constitute any tax, investment or legal advice. Consult your financial, tax or legal advisor regarding your own unique situation and your company's benefits representative for rules specific to your plan.

Gender, Overconfidence, and Common Stock Investment

By

The study, "Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment" by professors Brad M. Barber and Terrance Odean at UC Davis, found that men trade stocks 45% more than women, and this reduces their net returns by 2.65 percentage points a year, as opposed to 1.72 percentage points for women.

Here are some interesting conclusions from the study:

"Psychological research has established that men are more prone to overconfidence than women, particularly so in male dominated realms such as finance … they may even trade when the true expected net gains are negative. Models of investor overconfidence predict that, since men are more overconfident than women, men will trade more and perform worse than women."

"Our empirical tests provide strong support for the behavioral finance model. Men trade more than women and thereby reduce their returns more so than do women."

The study can be found here.

The information provided here is intended to help you understand the general issue and does not constitute any tax, investment or legal advice. Consult your financial, tax or legal advisor regarding your own unique situation and your company's benefits representative for rules specific to your plan.