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Why You Should Invest Like a Girl
CNBC.com | October 10, 2011 | 11:34 AM EDT

A study conducted by Hedge Fund Research between 2000 and 2009 showed that funds managed by women significantly outperformed those run by men, with 9 percent returns for women and 5.82 percent for men.Most of the explanations for this gender discrepancy point in one direction: Testosterone.

Neuro-economist Paul Zak of Claremont Graduate University recently conducted a test in which he raised testosterone levels in men, and he noticed that they became more emotionally engaged in the tasks they were faced with — but not in a good way.

“They become more emotional and less analytical,” Zak says. This kind of spike leads to impulsive behavior; men are more likely to make investment decisions based off a hot tip, for instance.

“Hiring the captain of the crew team at Yale to be a trader just because you think he’s supercompetitive and has high testosterone might not actually be adaptive,” Zak says.

Risk aversion, on the other hand, allows an investor to keep a level head and take the time to do research — an approach most often attributed to women, but that’s also a hallmark of one very famous man.

“If you were to observe Warren Buffett working every day, all he’s doing is reading. He just consumes information,” says LouAnn Loftus, author of the book "Warren Buffet Invests Like a Girl: And Why You Should, Too."

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