Trade Essay Example | Topics and Well Written Essays - 1000 words

Trade - Essay Example It is a person's habit to give more emphasis on his/her success than failure and therefore he/she becomes overconfident. Barber and Odean (2001) present a belief that difference in gender has a relationship with the overconfidence level in particular field. They suggests that the men working in finance domain outnumber the women working by far, which marks that men are more confident than women in this field. Also that the attribute of self bias is seen more in men than women and therefore men are more likely to be overconfident. In order to justify the claim of overconfidence, been seen more in men than women, they quote the data from various surveys between 1998 and 2000 taken on a total of approximately 15000 respondents in which men expected their portfolio to outperform the index by a greater margin than women. Men trade approximately 45 percent more than the fairer sex, as per the data obtained from various brokerage firms. They also suggest that the average turnover rate for the common stocks for single man is sixty seven percent more than a single woman. Moreover Barber and Odean (2001) find out that women, at the end of the year, earn a return 0.143 percent lower than those earned by the portfolio at the beginning of the year whereas for men this number is 0.221 percent because of my churning activities seen in men than women. This justifies the fact that the stocks sold by both men and women outperform the ones they purchase. The stocks that men buy underperform those they sell by 20 basis points whereas the figure is 17 percent for women. At the end, Barber and Odean (2008) find out that the men on an average earn a monthly gross and net return of 1.501 and 1.325 respectively whereas for women this 1.482 and 1.361 respectively and concludes that the assumptions taken first that men trade more as compared to women and second that the men depletes the utility more due to excessive trading both holds good. An analysis on authors' finding:- There is a thin line of difference between confidence and overconfidence.While the authors appropriately suggest and prove that the number of trades executed by men is higher as compared to women, this may be because of better risk handling capacities in men than women. Authors aptly relate that trading is related to risk facing capacity and is also related to the income earned by an individual which well may be the only case and the data derived by the authors for the model may be necessary but does not seem sufficient to justify that the higher trades are a result of overconfidence. However the report generated by the authors definitely guides an investor in the following manner in his future