The stock market should be one of the world’s great meritocracies, where good trading ideas get rewarded regardless of who comes up with them. And then there’s reality, where women in the business of dispensing investment advice have trouble just getting their ideas heard.
A new study by researchers at the Yale School of Management and the Columbia Business School highlights the industry’s inequities, revealing a bias so profound that it even affects people’s willingness to take stock recommendations from men with neutral- or feminine-sounding names.
The study found that financial professionals are more likely to consider to investment advice when they think the person giving it is a man. Talk about irrational behavior, especially for an industry as performance-driven as finance.
The Real Investors Club
The study is based on the analysis of 3,520 investment recommendations made from 2008 to 2013 by 1,550 people on a private, online platform where users share their advice for buying and short-selling stock. The researchers chose this environment, which they nicknamed the “Real Investors Club,” because investment professionals use the platform to seek the best investment opportunities, and are therefore incentivized to ignore gender preferences.
The researchers examined two main areas: 1) the attention stage, where users click on and view recommendations they’re interested in learning about, and 2) the feedback stage, where they rank the trading idea on a five-point scale and leave comments.
What’s in a name?
The study found that women offering recommendations were regularly penalized in the attention stage.
Stock recommendations from people with typically “feminine” names, like Mary, were clicked on 25% less frequently than those given by users with traditionally “masculine” names, like Matthew. (The site itself doesn’t identify recommenders beyond their names, leaving their gender to be inferred.)
Two other important findings at this stage: Users with ambiguous or more feminine-sounding names would garner fewer clicks than those from users with traditionally male names; and users with more feminine names had to have high-performing recommendations just to have their ideas viewed as frequently as users with masculine names whose recommendations had just average performance.
In the feedback stage, researchers found no difference in how the advice was evaluated, meaning the gender bias disappeared only when the evaluators had more complete information about the recommendation.
Implications for women and minorities
The study is yet another piece of evidence that gender bias exists in a market that should be performance-minded, but its ramifications extend beyond the financial industry. The findings suggest that those who are part of an underrepresented group in any sector should “provide as much performance-based information as they can during an evaluation process,” says study co-author Tristan Botelho, an assistant professor of organizational behavior at the Yale School of Management.
In other words, if you’re part of an underrepresented group applying for a new job or a promotion, you should provide as much evidence of your accomplishments as possible during the initial evaluation stage.
Implications for organizations
There are practical steps organizations can take if they are interested in rectifying inequality. For example, during the hiring process, they should remove identifying information wherever possible. New technology is aimed at doing just this: there are apps that will hide a candidate’s name, age, employment, and criminal history, and even photos. Interviewing platform Interviewing.io even masks the voices of candidates, ensuring that implicit bias doesn’t get in the way of hiring the best candidate.