Do women make better stock-pickers than men?
Recently, a couple of prestigious journals took up the question. Institutional Investor examined whether women hedge fund managers outperform their male counterparts. At the same time, the Financial Analysts Journal published an article whether woman stock analysts make more accurate earnings forecasts than men.
The first study showed that from 2000 through 2009 hedge funds run by women produced about a 9% return, versus a 6% return for their male-run counterparts. The analyst study showed that women analysts produced less optimistic and less accurate forecasts than their male counterparts during the period from 1995 through 2005.
Some have concluded that this is a symptom of male testosterone. Men are risk-takers, the story goes, so they’re more aggressive in their portfolio allocations and more optimistic in their estimates. That’s hurt performance in the market downturn, but helped them during the internet boom.
But the devil is in the details. It turns out that only 6% of hedge fund managers are women: one woman for every 18 men. That’s a great example of sample-bias. One outlier can really move the average. And another study of women stock analysts found opposite results: the men were less accurate. It’s not clear what caused the difference.
At the risk of being rude, these studies aren’t worth the paper they’re printed on. When all the facts are known, I’m confident that studies will show that gender has nothing to do with portfolio performance. What matters are discipline, rigor, and your relationships. Neither gender has a lock on these.
Douglas R. Tengdin, CFA
Chief Investment Officer
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