The Overconfident Investor

Political correctness is so rife today that it is very dangerous to make comparisons between races, people and especially between men and women. Larry Summers last tried to make a sensible distinction and ended up having to leave Harvard University without succeeding in taking required discussions forward. To my mind, political correctness of the worst kind allows for stereotypes and other associations to remain intact without their being subjected to proper scientific discourse.

One of the industries that is palpably under male domination world over is that of investment management. the explanations often given are about the glass ceilings that women and other minorities face. many of the men who undertake most investment decisions are characterized in the media and by business commentaries as extremely masculine and driven by adrenaline. be that as it may, a study by a mutual fund known as Vanguard, suggests that male investors indeed adhere to the stereotype but they often have nothing to show for all the swagger and overconfidence. The argument seems to suggest that unlike female investors, the overconfidence by males leads to errors of frequency of trade and timing entry and exits out of investments instruments and with that losses that would be avoidable. 

Taking forward the discussion about differences in investment behavior between the sexes, Jeff Sommer of NYT refers to studies that confirm that even in that heavy hitter's transaction of mergers and acquisitions, male executives tends to overpay for acquisitions. Now, that sends me dizzy because being a skeptic of most acquisitions and mergers, I already know that they tend to be value destroyers. If men do that badly here too, then perhaps business schools would do well to restructure curriculum for male MBAs. Now this does not in itself give me the license to state that women are "intrinsically" better businesspeople, but its clear that at the margin, the data shows that female managers may be better.