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
Date Written: September 4, 2016
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: Suggested Citation