- Data was analyzed to determine how stock market recommendations from a financial advisor are evaluated and whether a particular recommendation is chosen based on gender identification (i.e. female names)
- Investment recommendations submitted by men are more likely to be viewed than those submitted by women
- There is evidence that double standards lead to unequal evaluation outcomes for similarly performing men and women
NEW YORK – Many people argue that women are held to unfairly high standards and must outperform men with similar qualifications to receive equal evaluations.
New research coming from Columbia Business School and Yale School of Management confirms that these double standards continue to exist in peer evaluations of investment professionals.
The research, entitled Pursing Quality: How Search Costs and Uncertainty Magnify Gender-based Double Standards in a Multistage Evaluation Process, indicates that gender affects investment evaluations, even when more pertinent performance information is available. The research also identifies the conditions under which double standards contribute to unequal outcomes for women.
“Evaluation processes are a foundation of most market and organizational settings, and their outcomes have significant economic implications,” said Mabel Abraham, Assistant Professor of Management at Columbia Business School. “An individual’s characteristic, like their gender, can have a major effect on evaluations, making them more of an art than a science.”
The setting chosen for this research was the Real Investors Club (RIC, a pseudonym), a private online platform that brings together hedge fund and mutual fund investment professionals who share knowledge about market opportunities through recommendations to buy or sell stocks. RIC evaluators assess recommendations in a two-stage evaluation process:
1. The attention stage, which occurs when an evaluator assesses a recommendation to determine if it is worthy of further consideration based on a small amount of information, and;
2. The feedback stage, where an evaluator is provided with all information available in the attention stage, along with a detailed explanation supporting the recommendation.
The research found that in the attention stage of the evaluation process, recommendations submitted by men were more likely to be viewed or considered than similarly performing recommendations submitted by women. On the other hand, the research did not find evidence of a female disadvantage in the feedback stage when evaluators have access to more complete information.
Mabel Abraham, along with co-author Tristan Botelho, assistant professor of organizational behavior from the Yale School of Management, stress that it is only by examining whether men and women with similar performances receive different assessments that we can understand the extent of double standards. Furthermore, the specific measure of performance is important. These measures must be accorded similarly, such that two individuals taking the same action will receive the same performance score. Furthermore, all evaluators interpret these measures similarly, such that they agree on what constitutes a good or bad performance (i.e. the rate of return on an investment).
The study has important practical implications for organizational practices and policy aimed at rectifying inequality. To start, organizations can minimize gender identification in the evaluation process when information uncertainty is high. In addition, increasing the presence of minority groups may reduce the reliance of gender status characteristics in investment evaluations. Platforms which provide equal access to investment professionals may play a critical role in achieving this goal.
Policymakers have also taken measures to increase the number of women in the investment industry. Although such prescriptions are unlikely to eradicate gender inequality, they provide a path toward progress.
About the Research
To understand how gender affects the evaluation process, the RIC setting was chosen due to it being well-suited for uncovering, whether, and to what degree, gender-based double standards are activated in organizational and market contexts. This setting is perfect for uncovering gender-based double standards because investment professionals are motivated to identify quality and have access to objective quality information. Data collected from RIC was from 2008 to 2013, along with financial market data from the Center for Research in Security Prices and industry data from Compustat.
To learn more about the cutting-edge research being conducted by Columbia Business School researchers, visit www.gsb.columbia.edu.
About Columbia Business School
Columbia Business School is the only world-class, Ivy League business school that delivers a learning experience where academic excellence meets with real-time exposure to the pulse of global business. Led by Dean Glenn Hubbard, the School’s transformative curriculum bridges academic theory with unparalleled exposure to real-world business practice, equipping students with an entrepreneurial mindset that allows them to recognize, capture, and create opportunity in any business environment. The thought leadership of the School’s faculty and staff members, combined with the accomplishments of its distinguished alumni and position in the center of global business, means that the School’s efforts have an immediate, measurable impact on the forces shaping business every day. To learn more about Columbia Business School’s position at the very center of business, please visit www.gsb.columbia.edu.
About the researcher
Mabel Abraham is the Barbara and Meyer Feldberg Associate Professor of Business at Columbia Business School and a Read more.