2008 financial crash: Not enough women in charge?

[Francesca R]

[Disclosure: I am a female investor and I have worked in investment banking for 12 years ]

Story from the FT today (20/11/08) "Get women on board, bailed-out banks urged"

Women should be appointed to the boards of banks bailed out by the government, according to a bellwether report on women in the boardroom [ . . . ] Ruth Sealy, one of the authors, said: "We might not be in quite such a dire situation if there had been more females on the boards of banks. The evidence is that women are not more risk-averse, but they are more risk-aware." [ . . . ]

The majority of women executives were against positive discrimination, but saw a need for new measures such as targets. "Emotionally I think it should be non-interventionist," said one female director. "But I know from the work I've done that unless you have targets/quotas, it doesn’t change."

From money.co.uk (18/11/08): "Women Make Better Stock Pickers than Men"

A study carried out by DigitalLook.com revealed that over the last 12 months, as stock markets have displayed continued volatility, female private investors have suffered smaller losses than their male counterparts. [ . . . ] Previous studies conducted by DigitalLook.com in 2004 and 2005 also show that women achieved better returns on their equity investments than men when stock markets were rising.

Link to Digital Look studies (requires free registration)

From The Times (30/09/08) "What caused the crunch? Men and testosterone"

men and women may be similar in many ways but they are measurably different when it comes to risk-taking. This is borne out by the fact that men pay higher car insurance premiums, and corroborated by dozens of experiments into financial decision-making. Nobody disputes this, but a surprising number of psychologists (often women) argue that they are the product of a sexist culture and that women would be liberated into taking as many risks as men if they were not so oppressed - if, for example, they ever found themselves running the City. At the risk of sounding impatient, they are wrong. [ . . . ]

So how do we limit excessive risk-taking? Tougher regulation and beefed-up moral hazard (ie, making banks more accountable for their mistakes) will never be enough. What is needed is a transformation in culture that would most readily emerge from a huge influx of talented women into the boardrooms and on to the trading floors. A scattering of women is insufficient, for the women who tend to make it into the upper echelons are precisely those likely to be at the male end of the behavioural spectrum

From the FT again (14/04/08) referencing a study by John Coates in Proceedings at the National Academy of Sciences (PNAS): "Traders should track their hormones

We found that a trader’s daily testosterone levels were indeed higher when he made an above average profit.

Testosterone is likely to rise in a bull market, increase risk and exaggerate the rally. Chronic cortisol exposure, on the other hand, promotes feelings of anxiety, a selective recall of disturbing memories and a tendency to find danger where none exists. Cortisol is likely to rise in a crash, make traders dramatically and perhaps irrationally risk-averse, and exaggerate the sell-off.

Could this upward surge of testosterone, cockiness and risky behaviour also occur in the financial markets? This was a question I asked while working on Wall Street during the dotcom bubble. Many traders at this time displayed manic behaviour and a sense of infallibility. Equally telling was that women appeared relatively unaffected

Link to PNAS paper (PDF)

A year-old story in The (Toronto) Star 06/12/07: "Mars and Venus at the online trading keyboard"

Two professors at the University of California at Davis, Terry Odean and Brad M. Barber, have been studying men's and women's "behavioral finance" - the psychology of investment - including that of men and women online traders. Odean and Barber did at least three studies during a 15-year span, starting in the early 1990s. One was a study of 150,000 share trading accounts of private investors. Another was a study of 66,400 Merrill Lynch investors. Odean and Barber also analyzed six years of share account data for more than 35,000 households that were private clients of a large online broker. Here are some of their findings: men trade 45% more than women; single men trade 67% more than single women; and the average turnover of shares for men is nearly 1.5 times that of women. Yet at the end of the trading day, who has the most profitable portfolio-men or women? Odean's and Barber's 1991-1997 study showed that women's portfolios gained 1.4% more than men's portfolios. And single women gained 2.3% greater returns than single men did. Furthermore, Odean's and Barber's study also revealed that all-female investment clubs out-gained all-male clubs by 4.6%.

Link to UCDavis paper (PDF)

OK, so . . . I am probably biased, I might be cherry-picking (altough two quick google searches show about twice as many hits for the string "women better investors than men" than for "men better investors than women")

. . . Does anyone have a contribution to this? Thanks in advance.

 

[shuttlt]

It strikes me that "Woman Better at <blah>" is a better, or at least simpler story requiring less analysis, than "Men Better at <blah>", straight out of Chapter 1 of the Juniour Jounalists Big Book Of Nothing. Whether true or not, a journalist can make that sort of claim without too much justification because it panders to prejudices that we don't have to feel guilty about. I'm pretty sure a journalist would think harder about publishing a story that said men were better in the board room. Perhaps that's just my prejudice talking.

>Many traders at this time displayed manic behaviour and a sense of
>infallibility. Equally telling was that women appeared relatively unaffected
This is totally subjective and anecdotal.

One of your quotes points out that:
>A scattering of women is insufficient, for the women who tend to make it
>into the upper echelons are precisely those likely to be at the male end of
>the behavioural spectrum
This is a really confused and badly thought through paragraph. A couple of my issues with it are:

1. In a sexist environment, it may be that due to the tougher selection criteria, you are ending up with a more select group of women rather than women being fundamentally any better.
2. Having shown that women who display 'male' behaviours do well, the conclusion is drawn that 'female' behavious would result in even greater success. I don't think this follows.

 

[roger]

I'm certainly open to the idea, but who exactly are they measuring? Private investors. Which is fine, but this does not extrapolate into trained professionals managing institutional money. For one thing, private investors underperform pros, pros underperform the market, and the market underperforms a small subset of investors. That small subset of investors doesn't have enough females in it to form any meaningful analysis, so far as I know. Furthermore, the data sites 1 year of performance (in 2005 women outperformed men, etc). Hardly conclusive - a nifty fifty investor would have done great for awhile, until that particular strategy stopped working. What's important is performance across decades, not years.

That shouldn't be read as disbelief. Given how important risk management is, I can easily believe the long term trends would reward the risk averse, and that women would be more risk averse. But to do that over decades, they'd have to invest in more than food companies and utilities, which is the type of investments women in the study were making. I say the data is meaningless, but it raises interesting questions.

edit: I only looked at the digital look data. The UC Davis data, which I haven't looked at, looks more promising.

 

[Francesca R]

It strikes me that "Woman Better at <blah>" is a better, or at least simpler story requiring less analysis, than "Men Better at <blah>", straight out of Chapter 1 of the Juniour Jounalists Big Book Of Nothing. Whether true or not, a journalist can make that sort of claim without too much justification because it panders to prejudices that we don't have to feel guilty about. I'm pretty sure a journalist would think harder about publishing a story that said men were better in the board room. Perhaps that's just my prejudice talking.

Well maybe. But I also get considerably fewer hits for "women more violent than men" than for "men more violent than women" despite the former being the better attention-grabber. However, nothing very scientific either way here.

One of your quotes points out that:
>A scattering of women is insufficient, for the women who tend to make it
>into the upper echelons are precisely those likely to be at the male end of
>the behavioural spectrum
This is a really confused and badly thought through paragraph. A couple of my issues with it are:

1. In a sexist environment, it may be that due to the tougher selection criteria, you are ending up with a more select group of women rather than women being fundamentally any better.
2. Having shown that women who display 'male' behaviours do well, the conclusion is drawn that 'female' behavious would result in even greater success. I don't think this follows.

I don't think it does either.

 

[CFLarsen]

I also get considerably fewer hits for the equivalent of "psychics being real" than for "psychics being crooks". Go figure.

The question is: What would qualify someone to read the market the best way?

If the answer is gender, why is it a good thing to say that women are better at some things than men, but not a good thing to say that men are better than women at other things?

Now, now: Don't say that it is OK to say that men are better at some things than women. That's a no-no. We all know that.

 

[Zeuzzz]

Now, now: Don't say that it is OK to say that men are better at some things than women. That's a no-no. We all know that.

Its the same with race aswell. A lot of black people can get away with a hell of a lot more in terms of being racist than white people can. I've always wondered why this is. Doesn't seem fair really, not that you would want to be rcist or anything, but it just seems like a double standard. but this may just be my perspective of it.

See this joke at comedy jam, if you switch it its would be very offensive, like the guy telling it says; http://www.youtube.com/watch?v=jyald5tqM8E but he sort of gets away with it.