Boys Will Be Boys by Barber B & Odean T - Essay Example

?Barber B & Odean T (2001) Boys will be Boys: Gender, Overconfidence and Common Stock Investment. The Quarterly Journal of Economics, February 2001 Summary: The article titled ‘Boys will be Boys: Gender, Overconfidence and Common Stock Investment’ critically examines the gender balance in terms of the confidence in investments. The paper has tested the general theory that overconfident investors invest aggressively. The study has tried to bring in a gender based approach while testing the above said theory. Another psychological theory has been used as background research for the paper which states that men are more overconfident when it comes to matters like finance and investment. The study has considered data from a large discount brokerage ranging to 35,000 households. The gender wise common stock investments patterns of the studied population were analyzed. Investments from February 1991 to January 1997 were considered for the study. Several models to test and measure over confidence have been reviewed in the paper with reference to the available literature. A thorough review of literature connecting gender and over confidence also has been exhaustively carried out. The research has focused on common stock investments and has excluded data relating to mutual fund investments. Apart from the gender based demography another variable in the study is the marital status of the investors. Thus the study has considered the possible influence of the partner over investment decisions. The data on demography has been sourced from secondary sources as provided by a private agency called Infobase along with data directly provided by the brokerage house. The article is based on the assumption that the psychological theory over the investment confidence that men are more confident could be accepted and taken as a base for the research. The investment performance of men and women were evaluated by calculating gross and net return performance of each household which were included in the study. The paper suggests that men trade 45 percent more than women. However, the risk involved in the aggressive trading habits of men results in a reduction of 2.65 percentage points a year in their trading returns. On the other hand, in the case of women, the reduction in trading returns is 1.72 percentage. The empirical tests of the study strongly suggests that men trade more than women resulting in increased risk and reduced returns in the case of men. This observation is more prominent in the case of investors who are single in comparison with the married. Critique The article addressed a focused objective. The article has tried to analyze the comparative trading confidence between men and women. The author has added a number of literatures which substantiates the relevance of the objective. Extensive literature review over ‘Overconfidence and Trading on Financial Market and, ‘Gender and Overconfidence’ has substantiated the theoretical framework of the study. So as to form the background of the objective, the author has provided literature pertaining to the psychological theories which suggests the hypothesis as put forth by the paper. Two hypothesis put forth by the author are ‘men are more overconfident in finance and investment; and overconfident investors invest aggressively. These hypotheses have been well supported by the literature review. This scientifically backs up the objective of the article and substantiates its thesis. Adding to the strength of the article many authors as cited by the articles have published supporting information with regard to the objective of the reviewed article. As far as the literatures cited are concerned, the author has provided ample background information through referring to a number of literatures. While analyzing the literatures cited by the author, it can be found that appropriate and adequate works has been referred to. The oldest literature cited in the article dates back to 1965. A literature which was published in the year 2000 also has been cited in the article. This proves the adequacy and the depth of the research done by the author. This fact becomes more relevant considering that the objective of the article demands a critical comparison of the psychological theories pertaining to the thesis along with literature on changing trends in investment. An added strength of the article is that the literatures referred belong to an explicit range of database and periodicals. The hypothesis wise coverage of the literature review also adds to the scientific value of the article. The structured research that has been involved in the process of writing the article is quite evident. Each particular part of the objective has been supported by relevant literature. The data on demography has been sourced from secondary sources as provided by a private agency called Infobase along with data directly provided by the brokerage house. Similarly, sufficient number of literatures has been referred by the author with regard to the gender differences in investments. The depth and the structuring of the research is further confirmed as the article has specifically dealt with and cited literatures referring to different sectors of investments. The contrast in the socio-economic profile of the investors has been referred to and cited in the article. Literature pertaining to testing methods on stock returns has been referred in detail. The structure of money management industry also has been cited in the article. This is a strong indication that authentic and reliable sources are used as reference in the article. As far the type of references are concerned, it involved wide range of sources as the literatures cited included policy documents, journal articles, books and book chapters. However, the inclusion criteria of the literatures are not mentioned. From the list of references, literatures from other languages could not be identified as well. Primary sources like surveys and interviews are also found not to have included in the article. However, the nature of the study and the specific objective of the study justify the reason for not having included surveys and interviews. All the references are specifically related to the subject of research and thus add to the quality of the article. The structural framework of the article makes it easy for the reader to follow. The article is well arranged in accordance to the variables involved in the objective of the article. The language used is academic in nature. However, though the title suggests the inclusion of all kinds of investments classified on the basis of gender, the study limits its scope to common stock investments. Thus the title of the article does not justify the objective and the content of the research. The language used all through the article is simple and scientifically precise. The author has ensured to add proper in-text citations as well. Specific academic structuring format also has been taken into account. Although a lot number of literatures supporting the assumptions suggested by the study has been included in the article, the researches and findings which contradictory to the assumptions are not dealt in detail in the article. This makes the conclusions of the study biased. The alternate possibilities of arriving at a conclusion have not been considered. However, considering the fact that the literatures included in the study are scientifically relevant, the conclusions suggested by the article become more precise. The conclusion of the article suggests the difference in the confidence in investments between men and women. The key conclusions made by the article are that there exist significant differences in the return rate over investment amongst men and women. The risk taking nature of men, as supported by ample research quoted in the literature review is stated to attract more losses. As this relates to other theories of gender differences the findings if the study becomes of social relevance. Thus the conclusions of the article prove to be of ethically relevant and valuable. Thus the conclusions of the article are locally applicable. The ethical and the usability part of the article are thus justified. In totality, the conclusion of the study has succeeded to reflect the main findings of the study and raise socially, psychologically and economically relevant questions pertaining to investment patters of men over women. The title of the study, however reflects a very biased perception over the investment habits of men. The title ‘Boys will be boys’ tend to reflect a very strong gender bias. The title could thus mislead the reader. The findings of the study have been well expressed in the conclusion part. As an abstract of the critique on the article titled, ‘Boys will be Boys: Gender, Overconfidence and Common Stock Investment’, it can be precisely stated that the author has succeeded in conveyed the intended message with regard to gender based investment patterns with special reference to Common Stock Investment. The article is scientifically well structured. Moreover, the information included in the article has been well backed by scientifically relevant published literatures. In other language, there has been ample research involved along with the article. Read More

 

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