“If you think something is going away, it can lead to excessive and desperate consumption,” says George Loewenstein, a professor of economics and psychology at Carnegie Mellon University in Pittsburgh.
Legitimate marketers, con artists and stockbrokers make lots of money off our irrational behavior. I didn’t need that last plate of sushi, and I absolutely didn’t need that last drink. My wife told me to slow down, and I didn’t listen — and while she might say that’s not an altogether uncommon occurrence in our relationship, this time I really should have because I overate, overdrank and overspent. And a load of research in behavioral economics suggests that a man’s portfolio and pocketbook would be a lot better off if we listened more to women.
Terry Odean, a University of California professor, has studied stock picking by gender for more than two decades. A seven-year study found single female investors outperformed single men by 2.3 percent, female investment groups outperformed male counterparts by 4.6 percent and women overall outperformed by 1.4 percent. Why? The short answer is overconfidence. Men trade more, and the more you trade, typically the more you lose — not to mention running up transaction costs.
“In our research, male investors traded 45 percent more than female investors,” Odean says. “Men are just making a lot more bad decisions than women. More trading leads to lower performance.”
Stock picking with men is too often about one-upmanship and bragging, says LouAnn Lofton, author of “Warren Buffet Invests Like a Girl: And Why You Should, Too.”
“With men, too often investing is all about keeping score. It’s a macho thing,” Lofton says. “They’re looking for hot stock tips to get the quick win and then talk about it.”
Additionally, men hold onto their losers a lot longer than women. They’re sure the stock will come roaring back — even as it sinks. Academics call it confirmation bias; investment advisers call it boneheaded.
“Women are more loss averse than men, more emotionally unattached and are far quicker to unload losers. Whereas men with their bravado, they don’t want to admit they’re wrong,” says Anthony Zalesky, a certified financial planner who advises individual investors and small businesses.