Long-term investing is typically more lucrative than fickle trading, and now it seems that more women than men understand the value of patience.
Past research indicates that overconfident investors trade excessively and that more men are overconfident in money matters than women. To see if male investors pay a price for pompous purchasing, Brad M. Barber, Ph.D., a University of California-Davis (UCD) finance professor, and Terrance Odean, Ph.D., a UCD management professor, compared more than 35,000 investor portfolios between 1991 and 1997. Their findings, appearing in an upcoming Quarterly Journal of Economics, show that married men traded 45% more and earned 1.4% less in average annual returns than married women, while single men traded 67% more and earned an average of 2.3% less a year than single women.
"Women do better because they trade less, and trading is costly," Barber explains. Trading costs--fees for trading stocks--consumed a larger chunk of men's portfolios than women's. Still, all investors buy stocks that under-perform those they sell. "Men and women are both poor stock pickers--men just do it more frequently," Barber says.
