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

Abstract

Theoretical models predict that overconfident investors trade excessively. We test this prediction by partitioning investors on gender. Psychological research demonstrates that, in areas such as finance, men are more overconfident than women. Thus, theory predicts that men will trade more excessively than women. Using account data for over 35,000 households from a large discount brokerage, we analyze the common stock investments of men and women from February 1991 through January 1997. We document that men trade 45 percent more than women. Trading reduces men's net returns by 2.65 percentage points a year as opposed to 1.72 percentage points for women.

Cite this paper

Related papers

1. The Pricing of Options and Corporate Liabilities1973
2. CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK*1964
3. On Persistence in Mutual Fund Performance1997
4. The Cross‐Section of Expected Stock Returns1992
5. Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency1993