Who’s winning? Men and Women Liked Stocks Compared

This week SigFig, an algorithm-based investment manager, published a very entertaining report that, once again, demonstrates that men and women have a totally different approach when it comes to investing. In addition, it also convincingly confirmed all stereotypes about male and female investing capabilities. As this article by Business Insider summarizes men trade more, realize lower returns, and are significantly more likely to lose money. However, totally unmoved by any of these statistics, men remain the most optimistic about their chances to beat the market.

Returns on male and female stocks

The SigFig study included a very intriguing graph (shown below), which reveals that men and women are drawn to completely different companies. Men favor stocks of companies that ‘make the headlines’, while women go for the ‘less trendy picks’. This graph poses an interesting question. What has been the better investment? Stocks that are more liked by women, or stocks more liked by men?

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To find out I calculated the 1-year total return for all the stocks mentioned in the SigFig graph. I then averaged the returns of all stocks that are in the ‘female’ portfolio and the returns of all stocks in the ‘male’ portfolio. The result is unexpected. Not women, but men realized the better return. The portfolio of nine ‘men’-stocks generated a return of almost 26%, while the female portfolio returned 23%. A difference of almost 3%. Not that women did poorly, though. Both portfolios massively outperformed the S&P 500 index which realized a total return of ‘just’ 16%.

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The graph also shows the average returns excluding Apple. According to the SigFig graph, Apple is equally loved by men and women. So, other than impacting the average return on both portfolios, Apple is not really of help in comparing stocks that are more liked by women or men. Hence, it makes sense to exclude Apple from both portfolios. But even when the staggering performance of Apple is left out (+66%) both men and women still manage to beat the S&P 500 Index (which does include Apple by the way.)

Equally risky

Now, it could be the case that the female portfolio is less risky, which explains why it trails the male portfolio. This is not the case, however. The graph below shows the average volatility for both portfolios. As the graph reveals, the risk profile of the two portfolios is very similar, between 23-24%. The difference in volatility is too small to explain the return differential. (Mind you, to keep things simple correlation effects are not taken into account.) Both portfolio are, however, significantly more risky than the S&P500 index. Probably also because the number of stocks is too limited to reach full diversification benefits.

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So, perhaps men can beat women in some occasions? Let me do one final check to know for sure. Thus far, I have used equally weighted average returns to compare the male and female portfolio. But, the whole point of the SigFig graph is, of course, to demonstrate that some companies are more likely to be owned by women while others are more likely owned by men. That is where the scores come in. For instance, Frontier Communications is 1.37 times more likely to be owned by women than by men. We can translate these scores into portfolio weights. Women are likely to own a bigger part of Frontier Communications (exactly 1.37 times the weight of men), while men will own a bigger part of Tesla, and so on. This way the relative attractiveness of companies can now be taken into account when calculating average returns.

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Order restored, Women beat Men

And guess what? When we use the ‘more likely to be owned weights’ to calculate average returns the order is restored. When all shares in the SigFig graph (ex Apple) are divided between men and women according their likely to be owned weights, women realize the better return. Together all companies (male and female) realized an average return of 19.5%. Of that return, 10.1% goes to women and 9.4% to men. So, once the ‘likelihood to be owned’ is taken into account, women again come out on top. There is just no way around it.

One response to “Who’s winning? Men and Women Liked Stocks Compared

  1. Pingback: Week End Blog – Politicians at the Gate | Jeroen Blokland Financial Markets Blog·

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