When It Comes To The Stock Market, Women Win The War Of The Sexes

In 2009, I began paying a lot of attention to tall and tattooed young men, thanks to my son Lucas’s newfound passion for basketball. Because of him, my lifetime professional basketball game attendance went up a mere 3,000% or so in six months.

We had a lot of fun, and I enjoyed watching the guys duke it out.

Even so, the highlight of my basketball experiences that year was going to Madison Square Garden to see the WNBA’s New York Liberty take on the Connecticut Sun. That’s because Billie Jean King was there. When the announcer called her name, she stood up and waved. The crowd went wild.

So did I.

Billie Jean rocked my world in 1973. I was an eleven-year-old girl in desperate need of role models when she beat professional Male Chauvinist Pig and master showman Bobby Riggs in “The Battle of the Sexes.”

At that moment, a world of possibilities opened up to me.

An unexpected bonus at the WNBA game was that many of the men’s rooms had been temporarily converted into women’s rooms, given that women vastly outnumbered the men. If you don’t think bathrooms are a topic worthy of mention in an essay, it’s a fair bet that you are not female.

Every woman knows that there’s a law of the universe that requires the women’s room:

1. to always be miles farther away than the men’s room, and

2. to always have a long line.

This is such a grave injustice that in 2005, Mayor Bloomberg signed the Women’s Restroom Equity Act [a.k.a. “the potty parity act”] to remedy this sorry state of affairs, at least in New York City.

Contrast this to my experience a few days later at the 14th Ira Sohn Investment Research Conference.

Ira Sohn is a much-anticipated event where investment luminaries share moneymaking strategies and raise millions for children’s cancer programs. This benefit is an example of Wall Street at its finest and most generous.

This time, however, when I went to the ladies’ room at the conference, it was COMPLETELY EMPTY.

Yes, there were a few of us dames among the hundreds of men in attendance, but it was sad to me how few of us there were.

Of the eleven speakers that day, none were women.

This is not unusual. Take the well-regarded and thoroughly enjoyable publication Value Investor Insight, which features interviews of money managers. The same puzzling absence of females bugged me so much that I asked an intern to troll through back issues and keep a tally.

In this “battle of the sexes,” the score was a precise Women: One; Men: One kazillion.

Let me start by saying that I’m sure this lack of inclusivity is not deliberate. We rely on our networks, and our networks tend to be made up of people just like us, so it’s easy to unintentionally perpetuate the status quo.

But it’s a problem for our industry and a problem for your investments.

Because if you believe the volume of research that shows women invest differently than men, a single-sex portfolio is an undiversified, riskier portfolio.

Here are a few samples from the mounting evidence of gender differences in investing:

From Fidelity Investment’s “2021 Women and Investing Study”:

New analysis of more than 5 million Fidelity customers over the last ten years finds that, on average women outperformed their male counterparts by 40 basis points or 0.4%.

…

From “The Rise of the Female Investor.” Rachel White. Vanguard Voices, September 2021:

Women are less likely to engage in frequent trading behaviours that can be harmful to long-term investment returns, trading less than men — both in terms of volume and frequency. Vanguard data shows women trade up to 50% less than men. Interestingly, these behaviours are also the same habits that can help to determine investing success, particularly over the long term. Female investors are investing in ways that align with Vanguard’s long-held investment principles valuing patience and discipline, combined with the power of a broadly diversified investment allocation.

…

From “Boys will be Boys: Gender, Overconfidence, and Common Stock Investment.” Brad M. Barber and Terrance Odean. The Quarterly Journal of Economics, February 2001:

Using account data for over 35,000 households from a large discount brokerage, we analyze the common stock investments of men and women from February 1991 through January 1997. We document men trade 45 percent more than women. Trading reduces men’s net returns by 2.65 percentage points a year as opposed to 1.72 percentage points for women.

…

From “Relative status regulates risky decision making about resources in men: evidence for the co-evolution of motivation and cognition.” Elsa Ermer, Leda Cosmides and John Tooby. University of California, Paper 2997, September 2007:

Across two experiments, men who thought others of equal status were viewing and evaluating their decisions were more likely to favor a high risk/high gain means of recouping a monetary loss over a no risk/low gain means with equal expected value.

…

From “Sex Matters: Gender Bias in the Mutual Fund Industry.” Alexandra Niessen and Stefan Ruenzi. McCombs School of Business, University of Texas [Austin] and Centre for Financial Research, Cologne:

We find that female [mutual fund] managers are more risk averse, follow less extreme and more consistent investment styles and trade less than male managers. Although their average performance does not differ, male managers achieve more extreme performance outcomes and show less performance persistence. Nevertheless, female managers receive significantly lower inflows, particularly from institutional investors.

Here’s the point: Whether because of biology, evolution, or social conditioning (or some combination of all three), it seems pretty clear that there are important differences between how men and women invest.

And just as a diversified portfolio is a cornerstone of sound and disciplined investing, diversified approaches (i.e., approaches that draw upon the best tendencies of both sexes) are needed in the battle to maximize returns.

Photo credit: Unknown author, Public domain, via Wikimedia Commons