The Effect of Gender on Investors’ Judgements and Decision Making

We examine whether an unsophisticated investor's own gender and the gender of a sell-side analyst report writer jointly affect investor's investment judgements. Prior archival research suggests there is no factual basis for investors, irrespective of their gender, to respond differentially to analyst reports written by different genders. Yet archival research shows individual investors' gender affects their personal investment decisions both directly and via the investment set their advisors recommend. Using experimental methods we predict and find the unsophisticated investor's gender and the analyst report writer's gender jointly influence the investor's likelihood of investment. Our evidence suggests that female investors react more strongly to a female analyst's reports than male investors do, while both male and female investors react similarly to a male analyst's report. Hence, in a second experiment we use a cognitive intervention to encourage male and female investors to interpret female and male analyst's reports in the same manner. While the intervention is effective in encouraging an overall similar investor reaction across gender, the intervention also results in female investors underreacting to female analyst's reports. We discuss the implication of our study for investors and analysts