Women’s Day Special
They are strongest when they don’t assume they know better and aren’t overconfident.
The number of women traders in the Indian market has increased by 75% YoY, compared to 36% for all accounts till January 31, FY24. Research studies and market veterans argue that women traders are better than men traders due to their lack of overconfidence, which is a common misconception among women traders.
6 reasons women are superior than men.
Women Less Overconfident Than Men
1998 study by University of California researchers found that women are less confident, leading to less trading and loss. The study, which was cited by Sebi at the Moneycontrol Creator Economy Summit 2023, found that overconfident investors overestimate their ability to value financial security, worry less about others’ beliefs, and hold unrealistic beliefs about their returns. Men were found to be more prone to this folly than women. The study also found that single women, unencumbered by spousal overconfidence, perform even better than single men, indicating that women are less likely to overestimate their ability to value financial security.
Women aviod overtading than men
Researchers discovered that men trade more than women, with a turnover rate 1.5x higher than women. This results in lower returns, with returns being 0.94 percentage points lower per year. Single men also trade 67% more than single women, with returns being 1.44 percentage points lower per year. The difference is most pronounced between single men and women, with men lowering their returns more through excessive trading.
Women Show More Caution, Less Risk
Researchers have found that women hold less risky positions than men, with men investing in riskier positions in all four risk measures. While other studies have found men taking larger risks, there is no evidence to suggest they perform better. Additionally, a 2022 study by Capital.com found that women traders are more likely to put bigger stop losses and exit trades when hit, compared to men who put narrower stop losses and are more likely to move or cancel them, even when the trade goes against them.
Women Show Less Inclination to Fight Trends
Jyothi Budhia, a stock market investor with nearly four decades of experience, believes women are better traders due to their approach to trading. She believes that women tend to retreat when they incur losses, which reduces losses, while men tend to avenge losses and raise their bets, ultimately realizing that winning against the market is impossible.
Women Exhibit Lower Leverage Usage in Trading
Women are less likely to trade with leverage, as they tend to work with limited capital. According to Budhia, six to seven men out of 10 will take leverage and trade, while only one or two women in 10 do. Pallavi Gandhi, a credit rating company employee, also notes that women tend to work with their own capital and are less likely to take loans for trading.
Women More Realistic About Time and Money
Budhia explains that women have a more realistic view of their resources, as they believe they can earn money and have a time horizon. They also have a cautious attitude towards money, as they know they cannot lose big money as they will have to answer people back home, making them cautious in their financial decisions. This reflects their belief in the potential for long-term success.
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Budhia explains that women have a more realistic view of their resources, as they believe they can earn money and have a time horizon. They also have a cautious attitude towards money, as they know they cannot lose big money as they will have to answer people back home, making them cautious in their financial decisions. This reflects their belief in the potential for long-term success.
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