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Men trade 45% more, earn less
Several datasets point the same way. Across 5.2 million Fidelity accounts, women's investments beat men's. A Warwick Business School study found women outperformed men by 1.8% a year over three years. The UC Berkeley study tied the gap to trading volume.
Overtrading looks like the driver. Women tend to be a little more risk-averse and a little less overconfident, and that tends to produce better results. Men tend to be overconfident, trade more, and try to pick stocks, so a man who likes his Tesla ends up convinced the stock will rise, and he trades on that conviction.
Why does overconfidence lead to more trading?
The study is 'Boys Will Be Boys,' published in 2001 in the Quarterly Journal of Economics by Brad Barber and Terrance Odean, who followed about 35,000 households at a large discount brokerage from 1991 through 1997. Men traded 45 percent more than women and earned lower net returns, with a larger gap for single men. Barber and Odean reasoned that overconfidence explains it, because psychology research finds men more overconfident in financial matters.
How much does heavy trading cost investors?
Barber and Odean's 2000 paper 'Trading Is Hazardous to Your Wealth' examined 66,465 households from 1991 to 1996. The average household earned 16.4 percent a year against 17.9 percent for the market, and the households that traded most earned 11.4 percent. The authors traced the shortfall largely to trading costs.
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