A study came out of the UC Davis Graduate School of Management in 2001--stay with me here-- loaded up with scientific collateral as well as convincing simplicity, announcing what a few of us already regard as truths so self-evident they'd be up there with the pursuit of happiness and the right to upgrade if you have earned enough miles: men and women are different, and one way this difference manifests itself is through diverging styles, strategies, and ideologies of investment.
I think we should take another look at it.
Here's my reductive but not, I hope, misrepresentative version of the results presented in Terrance Odean and Brad Barber's "Boys will be Boys: Gender, Overconfidence, and Common Stock Investment": their evidence shows that women trade less often, take fewer risks, look for smart advice and precise information, and remain loyal--one might even say monogamous--to patterns of fiscal management that have worked to our advantage in the past.
And, in what I imagine is a revelation that will cause only a very few hearts to leap in surprise, it turns out that men spew their cash all over creation, trade stocks like greedy kids at a baseball card convention, and feel a sense of deep satisfaction in trusting their own instincts about the market even when their hunches are 100-percent fact-free and--how to put this gently?--wrong.
Guys trade around, apparently looking over their shoulders for any fresh, tantalizing, practically nubile investment possibility, eager to embrace it, tossing logic and rationality aside in one cavalier gesture of welcome. In contrast, women cleave to what is established and proven. Big shock, right? Maybe this sounds far less sexy or stimulating, but it turns out to be far wiser in the long run. As Barber and Odean quip: "Trading is hazardous to your wealth." But when women do choose to invest in equities, observes Barber, "They tend to do better because they trade less."
What explains the high levels of counterproductive trading made by men in financial markets? The researchers offer one word: overconfidence. "Those who trade the most realize, by far, the worst performance. . . .This result suggests that not only are investors too willing to act on too little information, but they are too willing to act when they are wrong," declares the study. "The average annual risk-adjusted net return earned by men is 1.4 percent less than that earned by women." So those bright fellows hurrying to act on their latest hunches might well be taking risks in all the wrong ways, given that "men (and particularly single men) are more likely to act (i.e. trade) despite their inferior ability. The net returns earned by married and single women are greater than those earned by their male counterparts, regardless of the benchmark used." Standing by your stock picks may be more profitable than standing by your man, especially if your man trades often and is, therefore, regularly shellacked by commission fees.
Much of the general advice being proffered to women by a cluster of recent books volunteering outlines and blueprints for financial management, however, urge women to consider acting and thinking more like men, insofar as risk-taking is regarded as masculine. Risk taking is presented as a sort of desirable secondary sex characteristic-- and, like a deep voice, often useful in the professional world--for which men are genetically hardwired but which most women will need to cultivate in order to possess.
Our culture's vision of success is enameled in a conventionally masculine compound of self-confidence, assertiveness, and risk. But how about if you can win without risk and achieve goals without edging up to some financial precipice? Women were told that it was necessary to play like the proverbial big boys in order to become a smart cookie.
The operating theory underlining this suggestion is that, by investing more heavily and trading more often, a woman will stumble on her long-buried self-confidence. As a result, she will find herself suddenly and profoundly elated by a sense of her own strength. She will become the huntress, the goddess Diana, bow and arrow transformed into portfolio and checkbook. She will also experience, through her monetary success, more of a change than she experienced with her loss of virginity, childbirth, or menopause.
Fear and self-doubt will disappear. In their place will grow a sense of savoir-faire and the ability to confront challenges head-on. No longer will she be eclipsed by the shadow of patriarchal oppression but will rise, formidable and triumphant, to accept every challenge.
Excellent advice overall--certainly we should throw off whatever fetters of tyranny bind us. But whether this can be accomplished by imitating male patterns of handling money is iffy at best. The argument behind most of these "how-to" books plays off the idea that women should change their behavior through glamorous and adventurous risk-taking.
Change can be good--but there are all too many pitfalls: consider the principle that dictates that the other line will always appear to move faster than the one you're on. If you switch lines however, you suddenly realize that the person directly in front of you is paying his bills by using coins from an obscure foreign country.
to be continued...