'She'll be right' looks spot on in world of share trading

By LEO LEWIS

What your share portfolio needs most, says new research, is the love of a good woman.

A report released this month says that when it comes to a bear market - one that's heading down - women traders are a safer bet than men.

Male traders are natural risk-takers, but women are more risk-averse, says the report.

Risk-taking's fine in a bull market - when shares are going up - because men are more likely to make huge sums for their clients. But when the stock market is in decline, women sell shares earlier and their losses are much smaller.

In fact, the London arm of investment bank Dresdner Kleinwort Wasserstein (DKW) says that on average they lose half as much as the men.

On the other hand, women quietly and cautiously get on with tending their portfolios in the bull market, making smaller gains.

The conclusions were drawn from a behavioural analysis of London traders and how they managed their portfolios.

"Much of the psychology behind markets has to do with the over-confidence of traders and the tendency to exaggerate their own abilities," says DKW analyst James Montier.

It's a psychology enhanced by the bull market, where rising stocks give people a false impression of their own stock-picking ability: "These are traits that men tend to demonstrate particularly strongly."

Within the gender split there are further refinements. Single men are by far the biggest risk-takers and pay for that with the biggest losses.

It's a psychology that translates directly to irrefutable numbers. American economists Brad Barber and Terrance Odean found significant differences in portfolio performance between the sexes when they compared the accounts opened by men and women at a brokerage between 1991 and 1997.

Men traded more actively - their accounts showed 45 per cent more activity than women's.

But that didn't help their bottom line. When Barber and Odean compared each person's end-of-year portfolio with the results he or she would have achieved had the portfolio been left untouched, they found that on average men reduced their earnings 2.7 per cent through trading.

Women would also have been better off had they left their portfolios alone - but at 1.7 per cent, the difference was much smaller.

It wasn't that men were worse stock pickers. For both sides, the stocks bought tended to underperform the stocks sold.

Theodora Zenek is a bond fund manager with asset management company New Star in London's City.

Her experiences bear out DKW's assertions.

"When it comes to a stock portfolio, women tend to look at the whole thing, while the men prefer to select particular investments," she says.

"Men are aggressive buyers, but that either gives you staggering out-performance or staggering under-performance." Men, she says, have more confidence but they also demonstrate "a tendency to fall in love with their investments".

"They are confident when they are stock-picking. But loss of face is everything, especially among their colleagues."

Kathy Jones of Wellington, a broker since 1988, says men will often seek external reasons for failure, perhaps fingering the broker. Women tend to take greater responsibility for their actions, she says.

Psychologist and business adviser Iain McCormick says women in business are generally more likely to seek feedback on their plans, which means their decisions are "better thought out and risks are managed more appropriately".

Women tend to have larger networks than men, he adds, so have a larger cast of advisers. And as they tend to cultivate relatively higher levels of trust, "the advice they receive from others is likely to be more accurate".

But McCormick says the differences between men's and women's business performance is likely to start narrowing as men learn from their female colleagues.

"In my opinion, the 'emotional intelligence' of men is rapidly catching up to that of women as men realise the importance of consultation, trust and team work."