Research in the Journal of Individual Differences found success in stock market trading was linked to being male and scoring high on self-determination. White men with high self-determination exhibited more riskier behavior and more financial success.
“The present data indicate a higher risk propensity among men, who invest more of their money into stocks and invest this money in relatively few stocks, rather than spreading their risk. In contrast, women tended to invest less money in total and had a broader range of stocks in their portfolio than men,” wrote the study authors.
A 21-day stock market simulation study enrolled 108 Caucasian men and women. Every participant started with a virtual amount of 10,000 euros for daily trading on 8 fictional companies. A series of daily emails was sent to each participant in regard to current stock prices, portfolio, news headlines, and trends. Participants would then reply every day to a “broker” on which stocks they were interested in buying or selling. The study was complete when participants submitted a questionnaire that surveyed personality, risk behavior, and stressful life events.
Gender differences were observed with men being more financially successful. Men were more likely to take on more risk by investing more money in a few stocks. Women, on the other hand, spread out their risk by investing in a wide range of stocks and creating a diverse portfolio. However, women tended to invest less money than men.
“The final model shows that gender remains the strongest predictor for trading behavior and financial success.”
A second predictor for stock market success was self-determination. Having high self-determination was linked to how much money people invested in stocks. “This is not surprising, as [self-determination] includes characteristics like self-confidence and an internal locus of control.”
There were limitations to the study including how representative the model is to real life. “Our stock market simulation paradigm is complex and ecologically quite valid. However, we cannot consider it to be completely realistic, because the subjects were able to learn which stocks developed positively and which stocks led to a loss in the long run. The task is thus, not strictly representative of trading behavior on the real stock market, where a learning curve is rather uncommon and unlikely.”
The study, “Predicting Stock Market Performance: The Influence of Gender and Personality on Financial Decision Making”, was authored by Thomas Plieger, Thomas Grünhage, Éilish Duke, and Martin Reuter.