(Australian Associated Press)
Women are generally smarter than men when it comes to knowing the right time to trade shares.
New research suggests women’s intuition gives them a competitive trading edge over men on the stockmarket.
University of New South Wales Business School researchers analysed Finnish individuals’ daily trading behaviour between 1995 and 2011. They found female investors did better than males when they bought and sold Nokia and 27 other major Finnish stocks.
The school’s Professor Peter Swan says the women preferred to buy under-priced stocks and sell overpriced stocks, which is an effective long term investment strategy.
“Our findings are consistent with females making choices quite differently from males and utilising different areas of the brain based on ‘theory of the mind’ and pattern recognition that enables females to enjoy greater trading intuition,” he said.
While women trade less often than men, they are better at determining when they should buy or sell shares, the research found.
For example, women were active sellers of Nokia shares to men in 1998 when the stock’s value increased 50-fold, Dr Swan said.
“They lost in the short term but by 2002/03 the price of Nokia had fallen 98 per cent so the males they sold to, they suffered these huge losses,” he said.
A few years later Nokia’s share price boomed again and women were very active sellers of the stock. In 2009/10 once again the price of Nokia collapsed as a result of the global financial crisis.
“Females are able to intuit whether prices are reasonable or not, much more so than males and as a result, they’re much more astute traders,” Prof Swan said.
“Their timing is much better generally than males. Some males seem to be caught up in the euphoria in seeing enormous short term gains.”
Dr Swan said individual investors did better than institutional investors despite having less diversified portfolios and investors who bought into companies headquartered in their own local area also tended to do well.
He said financial institutions should be keen to hire qualified female traders and implement bonus schemes focused on rewarding long term results.
“That, I think, would stabilise prices generally; we wouldn’t see these wild swings in stock prices,” Dr Swan said.