Why women (if they do not behave like men) should be running the finance world.
It’s a well-established fact that pretty much everything on earth would run better if women were in charge. That dictum would seem to extend to the financial markets
In a paper entitled “Thar SHE Blows? Gender, Competition, and Bubbles in Experimental Asset Markets,” Texas A&M’s Catherine C. Eckel and Sascha Füllbrunn, of Radboud University in the Netherlands offer new experimental evidence on the differences between the sexes when it comes to trading behavior, as well as a survey of the economic literature on gender and behavioral finance. This has been well-trodden research ground for more than a decade. So what do we know? (Or what do social scientists think we know?)
- Women tend to have lower financial risk tolerance than men.
- Which may explain why women make safer investments.
- Female fund managers in the US do tend to be more risk averse, trade less often and execute strategies that are less extreme.
- But their performance isn’t much different than male managers.
- Still, there’s evidence that there are large, gendered gaps in the commission payments that drive the way the financial world works.
- In the world of finance, there is evidence that competitive environments improve levels of effort and performance in males, while hampering the performance of women.
- Furthermore, if given the chance, women tend to shy away from competition.
- Men, on the other hand, will compete even if they’re more likely to lose.
- This might stem from a tendency toward overconfidence in men.