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Are men more irrationally exuberant than women?

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WOULD more women on the trading floor inject a dose of sanity into the world’s financial markets? This question gained prominence after the 2007-08 crisis. As Christine Lagarde, then France’s finance minister and now head of the IMF, quipped, had Lehman Brothers been Lehman Sisters, history would have been different. Many studies support this idea, showing that testosterone-laden men are prone to overconfidence in trading. Women are more cautious.

But things may not be so simple. Previous research has mostly used evidence from the West. To test if the conclusions apply universally, Wang Jianxin of China’s Central South University, Daniel Houser of George Mason University and Xu Hui of Beijing Normal University looked at both America and China. And they found that in China’s markets, women can be just as manic as men.

The economists arranged for 342 students to form experimental markets. They were allocated dividend-paying shares and tokens (in lieu of cash), and given 15 rounds to trade within gender-based groups. Participants could, in theory, calculate fair value of the shares in any given round but few did so.

In America, the outcomes matched past experiments. Shares quickly inflated to a bubble in male-only trading groups, before crashing. Women-only groups traded the shares at a discount for much of the time. In China male-only markets were just as unhinged. But so were the female-only markets, going from bubble to bust just like the male-only ones.

Critics will object that this was just an experiment. However, there is a long history of using such devices to study investment behaviour. Anecdotally, women have played a part in China’s market manias. In trading halls full of elderly day-traders, white-haired ladies sit alongside wizened men. Over the past two years women have also been on the front lines of protests after a series of online investment schemes collapsed.

Why China’s women might be as bold—and reckless—as men is open to debate. Other research highlights Communist Party policies promoting equality. But in practice women in China are woefully underrepresented in the financial sector. Only when that changes will it be possible to judge if China truly has gender parity in irrational exuberance.

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Julio Marchi ©

Publisher / Editor at BS News & Media Services
A free thinker, not labelled as anything, not associated with any party, not part of any group or engaged with any religion... A simple guy tired of the nowadays bullshit who decided to promote more serious debates about what is really happening hoping to bring back intelligence to the superficial and shallow news & headlines that unfortunately took over the existing media scene.
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