brightest bias,” I urge investors to take a

closer look at the data. Yes, the women that

have attained portfolio manager roles have

had to run a significant Wall Street

gauntlet, one which some would argue

weeded out any weak performers and left

only the strongest female portfolio

managers standing. However, the literature

on outperformance goes beyond the

relatively small sample of professional

money managers to explore the female

retail investor mindset. In that research,

which has been conducted on thousands

and thousands of men and women

investors, we see similar behaviours and

similar outperformance. It seems highly

unlikely that women retail investors would

have investment characteristics and

performance that wouldn’t be present, and

perhaps amplified, in female professional


At the very least, research shows that

women and men approach investing

differently. While researching my book

“Women of The Street: Why Female

Money Managers Generate Higher

Returns (And How You Can Too)” I

determined that the following factors led

men and women to different approaches to



Biology – Even though women

are often stereotyped as “more

emotional” when it comes to

investing, that may not be the case.

Brain structure and hormones impact

how men and women interact with

the markets, and can influence

everything from probability

weighting to risk-taking to market



Overconfidence – There have

been a number of studies that

show men have a higher tendency to

be overconfident investors.

Overconfidence can manifest in a

myriad of poor investment practices,

including over-concentration in a

single stock, not taking money off the

table, riding a stock too far down (“It

will come back to me”) and



Better trading hygiene – One

very crucial side effect of

overconfidence is overtrading.

Overconfident investors tend to act

(buy or sell) on more of their ideas,

which can lead to overtrading. Over

time, overtrading can significantly

erode investment performance.


Differentiated approach to risk –

Although women are often

stereotyped as being more “risk

adverse,” the truth of the matter is a

bit more nuanced. Men and women

weigh probabilities differently, with

women generally having a flatter

probability weighting scale. This

means they tend to not to inflate

expected gains as much as their male

counterparts, which can be beneficial

in risk management and in minimising

overall market bubbles.


Avoiding the herd – Women

may be more likely to look at

under-followed companies, sectors,

geographies or deal flow in order to

obtain an investment edge.

by EDGEFOLIO Thursday, 1 October 2015

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