Women spend more time researching their options than men, are better at matching their investments to their life goals, tend to trade less and when they do, remain calmer during the storms that unnerve male investors on the financial high seas, according to new research at the UNSW Business School.
“Women have a sensitivity to, and extremely sceptical of ‘pumped’ investments when prices are rising rapidly,” says Professor of Finance Peter Swan, the co-author of the paper ‘The gender face-off: Do female traders come out on top in terms of trading performance?’
Research analysing 17 years’ worth of trading found that female individual investors outperformed domestic and international institutional investors, and women did better than male individual investors when they bought and sold 27 major Finnish stocks over the past 17 years.
"We concluded that female investors prefer to buy under-priced stocks and sell overpriced stocks – compared with moving average prices," says Professor Swan. “It’s an investment strategy that over the long term, pays off.”
Past price movements informed the women's decision-making and they tended to anticipate mispricing opportunities such as during the GFC when they perceived – more acutely than men – that too much trading activity was risky and was therefore to be avoided.
"Our findings are consistent with females making choices quite differently from males and utilising different areas of the brain based on 'theory of the mind' and pattern recognition that enables females to enjoy greater trading intuition,” he says.
"Women are far more likely to buy when prices have fallen, indicating greater scepticism and contrarian behaviour than males," says Swan. "As a fund manager, your daily performance is compared to everyone else. That kind of contest might not be very conducive to attracting females, especially as it takes a while for the contrarian choices made by females to outperform. Our study might show that these funds need to set up their trading rooms less like the Wolf of Wall Street model and more conducive to women traders."
More details can be found here.