There is a good amount of evidence that female non-professional traders outperform male non-professional traders. I discuss this at greater length in the final chapter of my new book:
I do not mean to imply that female professional traders under-perform male professional traders. I have not seen a lot of data one way or the other on that point, though apparently there are some indications the female-run hedge funds also outperform.
There are a few interesting reasons as for why this might be. One is that females are better at “Theory of Mind” than males. Theory of Mind is the label for how we predict and explain the behaviour of others. One would expect then that since much of market out-performance is driven by predicting the behaviour of other market participants, that strong Theory of Mind would be possessed by better traders. And this indeed is what the data show. Since I don’t believe that anyone has explained Theory of Mind to traders, I also devote an early chapter of the book to that topic.
The other interesting possibility relates to confidence. There is a curse of over-confidence that afflicts at least non-professional traders. They fall in love with their own judgment. But it is only a fickle love. In three months, they will be in love with a new idea and a new stock. This makes traders commit the cardinal error of over-trading. It is well-known that “buy-and-hold” outperforms as a style over the long term. The fact is though that many retail trading accounts turn over several times in the course of a year.
It turns out that females are not less over-confident than males in one sense: they also form beliefs which they assert as confidently. However, it seems that female traders are less likely to act on these beliefs. So they are protected by this from letting their over-confidence lure them into over-trading.
This is just one account of the data. I cover more in the book. If you are interested in Theory of Mind, you could also take a look at my first book:
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