“Why women make the best stock traders”
“Female traders can be far more selective, as they spend more time evaluating before making a trade and have a calmer approach in financial storms. Previous research shows women trade less than men…females in the rest of the country also profited from their male counterparts.…female traders are far more “contrarian” than their male counterparts. They tend to buy stock following severe price falls and sell to males following substantial price increases. Females appear to lose money in the short-term (buying as prices fall, for instance), but gain in the longer-term following severe price reversals…On average, females buy cheap and sell dear, indicating they are far more informed than males.
This apparent contrarian trading strategy has the added effect of stabilising markets. In fact, the very large collective profit of 19 billion Euros that Finns made by trading with foreign (largely US) funds over the period of our study is due to the destabilising trend-following behaviour of the foreign institutions.
Although male trading activity increasingly dominated female trading activity over the 17 years we studied, female trades were more successful.
– Female traders managed an annual internal rate of return of 43% on their Nokia holdings, and 21.4% across the 28 stocks.
– The males, meanwhile, had correspondingly high losses – negative returns of -43% and -21.4% on their completed trades.
A striking feature of all our analysis is that Finnish households don’t behave in the manner that is depicted in standard finance texts. When they invest their own money they don’t diversify by holding the a representation of the “market”. In fact, on average the number of shares in their portfolio is only 3.4. Contrary, also, to popular belief, households trade very little compared to institutional investors. Very small and focused portfolios ensures far better management of the timing of trades.
The results of our study show that females are far better traders than males when they use their own money. This could be because they are better at picking up nuances in markets than are males. Moreover, they are not carried away by the euphoria of rapidly rising prices, as Wall Street dominated by aggressive male investors, tends to be.”