By Richard Morin Sunday, May 6, 2001; Page B05
Men believe they're better stock traders than women. Men expect a better return on their investment than do women who trade stocks. Men are more likely than women to think they're smarter about stocks than other people.
Well, guys are wrong, wrong and wrong, say two economists who have studied the performance of 3 million stock transactions made by men and women through a major discount brokerage firm over a six-year period.
Women who purchased stocks from a discount broker, presumably without the advice of a stock broker, earned the same return asmen did: About 1.5 percent a month, reported Brad Barber and Terrance Odean of the University of California at Davis in the latest Quarterly Journal of Economics.
But when it came to trading, the clear winners were women, they found. Men were far more likely to frantically trade stocks -- and far more likely to see the value of their portfolios drop as a consequence.
"The average turnover rate of common stocks for men is nearly one and a half times that for women," they found. And at the end of the average year, they discovered that all of this trading had reduced the value of men's portfolios by nearly a full percentage point more than those of women.
It's not that men pick loser stocks. The dirty little secret of investing is that people often sell stocks -- to finance new purchases or to act on a hot tip -- that typically are slightly better performers than the stocks they buy as replacements. Since men do more buying and selling, they do more "trading down," thus they don't earn as much -- or lose more -- than female traders, the researchersreported.