Sunday, March 05, 2017

Hidden figures. Women manage money better

My mother was a "computer", back in the days when the term applied to people. Plucked from high school because of her prowess at maths, she was put to work at the Weapons Research Establishment at Salisbury in South Australia, performing the calculations that enabled the rockets fired from Woomera to go where they should.

She had dozens of colleagues, all of them women: rows and rows of women, doing calculations for men before the invention of calculators.

Now immortalised in the movie Hidden Figures, their existence ought to kill forever the idea that women can't do maths.

Yet it persists. The Commonwealth Treasury used to be an overwhelmingly male institution until the start of this decade when a new boss began to drag up the proportion towards its present 53 per cent, along with 37 per cent of executives.

But dealing rooms remain disconcertingly male, full of white shirts dripping with sweat, coats on hangers and an atmosphere heavy with testosterone.

Why is it that we let women do our calculations, we let women care for us as doctors and nurses, but rarely let them manage our money?

It could be because of a (correct) belief that women are less likely to take risks. The National Australia Bank reports that its female clients are more likely choose "safe" investment strategies, and as a result miss out on long-term gains.

But the conclusion depends on the time period chosen.

If it's a period when the market is climbing, risks will pay off and avoiding them will look pretty silly, but if it includes a complete sweep from boom to bust, the safe strategies will look more clever.

The problem is there's little long-term data on the performance of share traders by sex. Except in Finland, where investors are required to report their gender whenever they buy and sell local stocks.

Professors Peter Swan from the University of NSW and Joakim Westerholm from Sydney University along with PhD student Wei Lu have obtained 17 years worth of Finnish data covering two complete cycles including the 2000 "tech wreck" and the 2008-09 financial crisis.

Examining only trades in the 28 biggest Finnish stocks, they find that on those occasions where women traded with men, women improved their position by a staggering 21 per cent per annum. Men were made worse off  by 21 per cent per annum.

When the examination was limited to the only really big stock in Finland, Nokia, women improved their position by an astounding 43 per cent per annum.

They sold to men when the price was rising, and bought from them when it was falling, but not in a mechanical way. Swan says they seemed to be better at reading what was happening; less gullible, more intuitive.

They're qualities we could use. On March 20 the Reserve Bank's Dr Luci Ellis will launch Australia's first Women in Economics Network. It'll maintain a list of members happy to speak out in public; a list of people worth paying attention to.

In The Age and Sydney Morning Herald