Are Women Better Traders Than Men?

The trading fiasco at JPMorgan Chase has triggered countless articles on regulation, risk, and strategy. Gary Belsky over at Time is taking a different approach.

The recent resignation of female JPM executive Ina Drew prompted Belsky to write this article suggesting more female traders should exist not just for the sake of equality, but because women are in fact better than men at the job.

For their 2001 study, the distinguished behavioral economists Terrence Odean and Brad Barber analyzed account data for more 35,000 households at a large discount brokerage, looking at the common stock investments of men and women from February 1991 through January 1997. Their top-line discoveries: Men on average traded 45% more frequently than women, and that hyperactive trading reduced their net returns by 2.65 percentage points a year, compared to 1.72 percentage points for women. Put another way: Men were on average worse stock traders than women.

Do you think women make better traders than men? As a guy, I'm inclined to defend my gender and say no. Here are 5 reasons why Belsky says yes:

  1. They're quicker to admit ignorance.
  2. They're more likely to seek help and advice from others.
  3. They're better at specific goal-setting.
  4. They do more "homework."
  5. They're generally more cautious about risk.

Belsky asserts that male traders are less profitable because they are overconfident. Yet I would argue that while an excess of confidence can mislead investors, an absence of it could cause traders to pass up high-reward opportunities. Trading also requires quick decision making, which requires a certain level of confidence. I'll admit my reaction is a little biased. But declaring outright that women are better traders than men? That's a bold statement.
Has anyone actually noticed these stereotypes? Would you feel more or less confident if your money was being traded by a woman?

Comments (53)

 
May 15, 2012 - 8:02pm

Nabooru:
By the way I loove how it's ok for people to say that women do things better than men but it's taboo for people to say men do things better than women, because that'd be sexist, right?

I like how you can have T-shirts, commercials, TV shows, executives, and politicians calling men stupid but how dare you say that about a woman. This with the objective fact that the STEM majors/professions are dominated by men.
 
May 15, 2012 - 6:53pm

Women get emotional = bad trader

I didn't say it was your fault, I said I was blaming you.
 
May 15, 2012 - 7:16pm

They definitely hedge their positions better when taking advantages of packs and coupons in the supermarket.

[quote]The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.[/quote]
  • 1
  • 1
 
May 15, 2012 - 7:14pm

I know the answer is "oh yeah dude there's this one at DB and she's raking mad P&L" but...

have you ever even seen a female trader?

I hate victims who respect their executioners
 
May 15, 2012 - 7:43pm

BlackHat:
I know the answer is "oh yeah dude there's this one at DB and she's raking mad P&L" but...

have you ever even seen a female trader?


Wait... I sat with one female equity trader at JPM, but she is honestly the only woman trader I've ever met. This is actually remarkable, considering their fair showing in sales.
 
May 16, 2012 - 8:00am

BlackHat:
I know the answer is "oh yeah dude there's this one at DB and she's raking mad P&L" but...

have you ever even seen a female trader?

Zoe Cruz aka the Cruz Missil was a legendary trader in her days at MS. In fact her trading prowess almost propelled her to become CEO of the whole company. Then it all crashed down with her desk losing $4 B betting on subprimes.

She then started her own hedge fund VORA which lost 8% last year. The fund was poorly managed and never raised much money so she just shut it down. I actually know the guy she hired to run Vora's Asia desk, he left after only a few months.

Does Nicole Agnew of GS count as trader? She has been doing well and rolling up the corporate ladder.

Too late for second-guessing Too late to go back to sleep.
 
May 15, 2012 - 7:31pm

One thing I DO know about trading; Trading should not be emotional.

I don't think I need to finish the rest of this conclusion.

"History doesn't repeat itself, but it does rhyme."
  • 1
 
May 15, 2012 - 8:06pm

andyinsandiego:
I'm not sure about the answer, but I'm positive that the question is trivial, and that Belsky could have used his time far more wisely doing something else.

I wouldn't say it's 100% trivial. The fact is there are not many female traders on Wall Street. That's a pretty big deal to some people. Maybe not for you, but the question also asks a broader question: are stereotypical attributes like overconfidence necessarily a bad thing? Would firms with more women be better equipped to beat the market? The study above posed this question under the assumption that all men and women have the same tendencies, which is incorrect. The common consensus is that emotional traders are bad traders, and I'd say knowing the difference between a good trader and a bad trader is pretty important.

See my WSO blog
    "The only thing that interferes with my learning is my education." Albert Einstein
 
May 15, 2012 - 7:59pm

+1 to Nabooru.

We've had ten female traders on my floor since I started. Only two is left. Can't say that the attrition rate for the male traders has been 80% over the course of my employment. I understand that 10 observations are too few to draw a conclusion, but I can see the trend line. Trading isn't for everyone, but risk management isn't that hard to master.

CNBC sucks

"This financial crisis is worse than a divorce. I've lost all my money, but the wife is still here." - Client after getting blown up

 
May 15, 2012 - 8:00pm

Correlation does not equal causation. Women that are independent enough in our culture to invest their own money in the markets usually are on the more mature end of the spectrum for their gender, while most men grow up just being taught that they're supposed to invest in the markets. Hell, it's something a lot of guys I know do for fun with their dads. I think the women that do trade usually have overcome enough and have the mental stamina to at least have interest in the markets that you're getting a selection bias, or whatever the words are.

Also, I know using anecdotal evidence is a logical fallacy, but I know far more men who are able to think logically and remain rational than women, across the board. This could be a result of who I've chosen to hang out with and my priorities when choosing who to spend time with, but nonetheless, women seem far more volatile and emotionally driven than men.

 
May 15, 2012 - 8:03pm

Depends on the market. If we're talking about flow trading on the Sex Exchange, they definitely have a leg up. I guess you could throw commodities in the mix too.

When it comes to marbles and baseball cards, I've always thought men to be the better traders

 
May 15, 2012 - 8:04pm

...In my opinion....From what I have read I believe the exact opposite. Woman are TOO cautious in trading to the point that they miss opportunities because they are indecisive. I have never heard of a woman that likes to take risks- so they worry too much about their money that they just pull it all out altogether. Women in general would be SAFER investor's not BETTER returns though. Women do their homework-that is for sure. I've read about manager's who altogether refuse to do business with women because they call up the fund every day to check how their money is and once it dramatically falls they immediately pull their money out. A large portion of men are ignorant-I believe that the humble man would makes the best investor because he learns from his mistakes and can admit when he is wrong, instead of justifying his decision. But then again some decisions you make are just the luck of the draw.

 
May 15, 2012 - 9:34pm

sambotanman:
...In my opinion....From what I have read I believe the exact opposite. Woman are TOO cautious in trading to the point that they miss opportunities because they are indecisive. I have never heard of a woman that likes to take risks- so they worry too much about their money that they just pull it all out altogether..

Hence why they place less trades.

Plenty of empirical evidence around that supports those who make fewer trades (retail) are more profitable due to minimizing transaction costs (and gender was not even an independent variable). All this study did (in my eyes - and yes I have actually read it before) was confirm that women place fewer trades and I would imagine sambo has hit the nail on the head as to why they trade less.

 
May 15, 2012 - 9:00pm

I've met a couple of wives who are very into swaps.

But no, not at all.

"There are three ways to make a living in this business: be first, be smarter, or cheat."
 
May 15, 2012 - 9:23pm

melvvvar:
you're talking about the retail crowd

you're comparing between shitty traders and traders that are slightly less shitty because they churn less


Basically this, there's no stats on professional traders as far as gender goes. As far as gender stereotypes go, women take less risks and are less likely to lose money (good) but less likely to make a big score (bad). But these are gender stereotypes with no quantifiable data points, so this is pointless....also, the person overseeing JPM risk here was a woman, so she's an anecdote to kill this point? Not sure I understand.

That having been said, I'd be an aweful trader because I'm fueled primarily by emotion/passion and yes I'm smart but I know what I'm like. I'd be much better as a CEO than a hedge fund manager. Oh shit, I think I just figured out my career goal.....thanks fellas.

Get busy living
 
May 15, 2012 - 9:32pm

UFOinsider:
melvvvar:
you're talking about the retail crowd

you're comparing between shitty traders and traders that are slightly less shitty because they churn less


Basically this, there's no stats on professional traders as far as gender goes. As far as gender stereotypes go, women take less risks and are less likely to lose money (good) but less likely to make a big score (bad). But these are gender stereotypes with no quantifiable data points, so this is pointless....also, the person overseeing JPM risk here was a woman, so she's an anecdote to kill this point? Not sure I understand.

That having been said, I'd be an aweful trader because I'm fueled primarily by emotion/passion and yes I'm smart but I know what I'm like. I'd be much better as a CEO than a hedge fund manager. Oh shit, I think I just figured out my career goal.....thanks fellas.

risk managers ain't traders

 
May 15, 2012 - 9:21pm

I didn't know you could trade from the kitchen.

MM IB -> TMT Corporate Development -> New Ventures
 
May 15, 2012 - 9:54pm

when I saw the title I laughed so hard I fell off my dinosaur

If your dreams don't scare you, then they are not big enough. "There are two types of people in this world: People who say they pee in the shower, and dirty fucking liars."-Louis C.K.
 
May 15, 2012 - 11:07pm

blastoise:
deja vu any one?

ha, yeah, but which part?
Get busy living
 
May 16, 2012 - 12:26am

Although it would vary so much depending on which sector and portfolio, I think on average, men generally are more apt to take the 'great leap forward', while women don't. Women tend to take a step at a time (and look back, making sure that it was the right step). Hence, women would be like installment savings while men would be 'traders'.

couldn't let go of my pair of aces...
 
May 16, 2012 - 3:42am

Hahahahahahaaaahahaa and ... No

Simplicity is the highest form of sophistication ~ Leonardo da Vinci
 
May 16, 2012 - 9:40am

"don't pitch the bitch" -BR

I hate victims who respect their executioners
 
May 16, 2012 - 9:54am

chabo11:
The trading fiasco at JPMorgan Chase has triggered countless articles on regulation, risk, and strategy. Gary Belsky over at Time is taking a different approach.

The recent resignation of female JPM executive Ina Drew prompted Belsky to write this article suggesting more female traders should exist not just for the sake of equality, but because women are in fact better than men at the job.

For their 2001 study, the distinguished behavioral economists Terrence Odean and Brad Barber analyzed account data for more 35,000 households at a large discount brokerage, looking at the common stock investments of men and women from February 1991 through January 1997. Their top-line discoveries: Men on average traded 45% more frequently than women, and that hyperactive trading reduced their net returns by 2.65 percentage points a year, compared to 1.72 percentage points for women. Put another way: Men were on average worse stock traders than women.

Do you think women make better traders than men? As a guy, I'm inclined to defend my gender and say no. Here are 5 reasons why Belsky says yes:

  1. They're quicker to admit ignorance.
  2. They're more likely to seek help and advice from others.
  3. They're better at specific goal-setting.
  4. They do more "homework."
  5. They're generally more cautious about risk.

Belsky asserts that male traders are less profitable because they are overconfident. Yet I would argue that while an excess of confidence can mislead investors, an absence of it could cause traders to pass up high-reward opportunities. Trading also requires quick decision making, which requires a certain level of confidence. I'll admit my reaction is a little biased. But declaring outright that women are better traders than men? That's a bold statement.

Has anyone actually noticed these stereotypes? Would you feel more or less confident if your money was being traded by a woman?

So we are supposed to be shocked that a bunch of women bought blue chip stocks and held them and thus lost less money due to not incurring transaction fees? What a retarded study... This guy went to the University of Missouri St. Louis, and writes for ESPN... I'm not exactly sure we should take his "assertions" as credible. How the fuck would he even know? Has he even been on a trading floor? Would probably defer to the people on this forum who do this for a living. I never hear about female traders, ever... so that should probably tell you something right there.

 
May 16, 2012 - 10:24am

rufiolove:
[This guy went to the University of Missouri St. Louis, and writes for ESPN

LOL @ nontarg doubt. Is ESPN a nontarg source of information? Maybe more to the point: why is a sports writer even venturing out of his field?
rls:
These type of arguments need to be borne of evidence not assertions or hypothetical extrapolations- especially when taking about trading. There is no equivocation in trading ... The P & L is the final word

Basically this. There aren't enough (any, actually) objective data points to draw any conclusion, just a bunch of stereotypes being tossed back and forth. If anyone here works with women traders, I'd be curious to see the P&L for the same trading space, broken out by gender....until then, this is subjective wordplay
Get busy living
 
May 16, 2012 - 2:11pm

UFOinsider:
rufiolove:
[This guy went to the University of Missouri St. Louis, and writes for ESPN

LOL @ nontarg doubt. Is ESPN a nontarg source of information? Maybe more to the point: why is a sports writer even venturing out of his field?

Yeah, my point more on what you mentioned last... He covers sports so why is he weighing in on this? Obviously, the answer is that he knows it's going to illicit a strong response from readership and thus increase traffic / audience exposure. But his opinion on the disparity in trading performance means holds absolutely no credibility, especially when viewed by a readership contingent comprised partially of experienced traders. What this indicates to me is shoddy journalism, which long-windedly brings me back to my off the cuff comment about his alma mater. Shit like this could theoretically come out of someone who studied journalism at Columbia, but it would be much more of a shock...

I'm not hating on non-targets... I went to one. I'm hating on him acting like he has a cogent grasp by opining on such a subject in as widely circulated of a publication as TIME magazine, when he really has absolutely no credibility... which is substantiated by the fact that he attended a school unknown in the journalism world and covers a completely unrelated subject matter full time.

Would be no different than if I made fun of a banker who covers tech companies trying to explain to a metals and mining banker on why a valuation is wrong. The metals banker would just laugh at him. I guess my response is fairly similar to this guy.

 
May 16, 2012 - 9:55am

Anacott_CEO:
I didn't know that you could trade from the kitchen

SECfinance:
I didn't know you could trade from the kitchen.

I already made that joke please go.

MM IB -> TMT Corporate Development -> New Ventures
 
May 16, 2012 - 10:06am

These type of arguments need to be borne of evidence not assertions or hypothetical extrapolations- especially when taking about trading. There is no equivocation in trading- it is one of the purest meritocracies that finance has to offer. The P & L is the final word on who is better. So, until there is hard evidence to point to- like a comprehensive comparisons of the P & Ls of Wall Street men and women that support the claims made here, merely examining stereotypical traits of groups of people is mere self-deception. It's like saying- "Look here- this 3-year is patient, asks a lot of questions, and says "I don't know" all the time. He'll make an excellent trader!" Bull. Trading is an highly individualistic quality and and is not applicable to wide swaths of people of either sex.

Two things about the faulty research used above:
1) They looked at amateurs with no clear evidence they were traders.
2) They did NO comparisons of absolute returns of the men and women. They simply muse that men, on average, trade more frequently and thus incur higher trading costs. That provides little information without context. If men traded more, and thus have a higher commission fee, but they ultimately made 5% more per year, they would negate the entire argument. Funny, how they never discuss the most important part of being a better trader- making more money.

Bene qui latuit, bene vixit- Ovid
 
May 21, 2012 - 4:32am

Ultimately, the proof is in the pudding. When some legit body of social researchers decides to do a formal study comparing the success between large random samples of female and male traders then we'll know which gender is better at trading.

Until then, it's pure speculation... Personally, I think making money has never been about gender (or else we wouldn't have self-made female billionaires), only about talent.

Start Discussion

Popular Content See all

Girlfriend vs PE
+83PEby Investment Analyst in Private Equity - Growth Equity">Investment Analyst in PE - Growth
I’ll never take WSO for granted again
+51OFFby Principal in Venture Capital">Principal in VC
What's so good about Evercore?
+39IBby Prospective Monkey in Investment Banking - Mergers and Acquisitions">Prospect in IB-M&A
I'm tired man
+29IBby Intern in Corporate Finance">Intern in CorpFin
Friends in IB are chilling hard, how can I get this?
+19IBby 3rd+ Year Associate in Private Equity - LBOs">Associate 3 in PE - LBOs
First year analyst, still feel incompetent and like I haven’t learned anything
+19IBby 1st Year Analyst in Investment Banking - Mergers and Acquisitions">Analyst 1 in IB-M&A

Total Avg Compensation

January 2021 Investment Banking

  • Director/MD (9) $911
  • Vice President (31) $349
  • Associates (141) $232
  • 3rd+ Year Analyst (18) $155
  • 2nd Year Analyst (86) $151
  • Intern/Summer Associate (89) $144
  • 1st Year Analyst (346) $134
  • Intern/Summer Analyst (298) $83

Leaderboard See all

1
LonLonMilk's picture
LonLonMilk
98.5
2
Jamoldo's picture
Jamoldo
98.4
3
Secyh62's picture
Secyh62
98.3
4
CompBanker's picture
CompBanker
97.9
5
redever's picture
redever
97.8
6
frgna's picture
frgna
97.6
7
NuckFuts's picture
NuckFuts
97.5
8
bolo up's picture
bolo up
97.5
9
Edifice's picture
Edifice
97.5
10
Addinator's picture
Addinator
97.5