sex & stox

Doug Henwood dhenwood at panix.com
Sat Dec 12 10:25:09 PST 1998


"Boys will be Boys: Gender, Overconfidence, and Common Stock

Investment"

BY: BRAD BARBER

University of California, Davis

TERRANCE ODEAN

University of California, Davis, Graduate School of

Management

Document: Available from the SSRN Electronic Paper Collection:

http://papers.ssrn.com/paper.taf?abstract_id=139415

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Date: November 1998

Contact: TERRANCE ODEAN

Email: Mailto:odean at ucdavis.edu

Postal: University of California, Davis, Graduate School of

Management

Davis, CA 95616-8609 USA

Phone: (530)752-5332

Fax: (530)752-2924

Co-Auth: BRAD BARBER

Email: Mailto:bmbarber at ucdavis.edu

Postal: University of California, Davis

Davis, CA 95616-8609 USA

Hard Copy Paper Requests:

Indicate author's name when requesting paper. Contact: Kathy

Thoren, Administrative Assistant, University of California,

Graduate School of Management, Davis, CA 95616 USA

Mailto:mkthoren at ucdavis.edu

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



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