Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment
Read the paperopens doi.org in a new tab
What they found
Psychology research suggests men are more overconfident than women in male-typed domains such as finance. Using the same discount-broker data (35,000 households, 1991 to 1997), the authors found that men traded 45% more than women, and that this extra trading reduced men's net returns by about 0.94 percentage points a year more than women's. Single men traded the most and had the worst net returns. Since gross returns were similar, the gap was purely the cost of overtrading.
What you can use
- Overconfidence is measurable in trading records: the group predicted to be more overconfident traded more and earned less.
- The performance cost of overconfidence shows up as turnover, not as bad picks.
- A useful self-check: if you trade more than your peers, ask whether it is information or confidence driving it.
Caveats
Gender is a proxy for overconfidence, not a direct measure. 1990s discount-broker data with high commissions. Says nothing about individual traders' skill.
Tags: retail, overconfidence, gender, trading-frequency
Summaries are our own reading of the paper, not the authors' words. Educational only, not advice. Discuss it in Book Club.