Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment

39 Pages Posted: 12 Nov 1998

See all articles by Brad M. Barber

Brad M. Barber

University of California, Davis

Terrance Odean

University of California, Berkeley - Haas School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: November 1998

Abstract

Theoretical models of financial markets built on the assumption that some investors are overconfident yield one central prediction: overconfident investors will trade too much. We test this prediction by partitioning investors on the basis of a variable that provides a natural proxy for overconfidence--gender. Psychological research has established that men are more prone to overconfidence than women. Thus, models of investor overconfidence predict that men will trade more and perform worse than women. Using account data for over 35,000 households from a large discount brokerage firm, we analyze the common stock investments of men and women from February 1991 through January 1997. Consistent with the predictions of the overconfidence models, we document that men trade 45 percent more than women and earn annual risk-adjusted net returns that are 1.4 percent less than those earned by women. These differences are more pronounced between single men and single women; single men trade 67 percent more than single women and earn annual risk-adjusted net returns that are 2.3 percent less than those earned by single women.

JEL Classification: G1

Suggested Citation

Barber, Brad M. and Odean, Terrance, Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment (November 1998). Available at SSRN: https://ssrn.com/abstract=139415 or http://dx.doi.org/10.2139/ssrn.139415

Brad M. Barber

University of California, Davis ( email )

Graduate School of Management
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Terrance Odean (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

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Berkeley, CA 94720
United States
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510-666-2561 (Fax)

HOME PAGE: http://www.haas.berkeley.edu/faculty/odean.html

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