The Gender Face-Off: Do Females Come Out on Top in Terms of Trading Performance?

63 Pages Posted: 20 Aug 2016 Last revised: 4 Sep 2016

Wei Lu

The University of New South Wales

Peter L. Swan

University of New South Wales (UNSW Australia); Financial Research Network (FIRN)

P. Joakim Westerholm

University of Sydney Business School; Financial Research Network (FIRN)

Date Written: September 4, 2016

Abstract

We study the relation between gender and stock trading performance using data on all trades by individual Finnish investors over 1995-2011. Following “holding-period-invariant” (HPI) portfolio approach - without imposing a heroic assumption that all individual investors rebalance their portfolio at specified intervals corresponding to an assumed horizon, we document significant and remarkable gain made by female investors at the expense of male investors in trading major Finnish stocks, yielding an impressive internal rate of return of 21.44% p.a. Our findings are consistent with females tending to have better ability in the “theory of the mind”, and hence are better at recognising patterns in the data with superior trading intuition. We further show that female investors prefer to purchases under-priced stocks and sell overpriced stocks based on the trading signal that the difference between contemporaneous price and moving averages over short-term, 4-week to long-term, 1-year. Our evidence suggests that it is possible to use the trading pattern of these smart female investors to anticipate market movements. We also identify the spouse trading accounts of insiders as we can match family names. Even when the accounts of these superior traders are removed we still find evidence that females are superior traders, especially in the greater Helsinki region close to Nokia and other company headquarters.

Keywords: Gender differences, Individual investors, Calendar-time, Horizon-invariant, Trading performance

JEL Classification: G11, G12, G14

Suggested Citation

Lu, Wei and Swan, Peter L. and Westerholm, P. Joakim, The Gender Face-Off: Do Females Come Out on Top in Terms of Trading Performance? (September 4, 2016). 29th Australasian Finance and Banking Conference 2016. Available at SSRN: https://ssrn.com/abstract=2826444

Wei Lu (Contact Author)

The University of New South Wales ( email )

Sydney, NSW 2052
Australia

Peter Lawrence Swan

University of New South Wales (UNSW Australia) ( email )

School of Banking and Finance
UNSW Business School
Sydney NSW, NSW 2052
Australia
+61 2 9385 5871 (Phone)
+61 2 9385 6347 (Fax)

HOME PAGE: http://https://www.business.unsw.edu.au/our-people/peterswan

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

P. Joakim Westerholm

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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