Gender and Job Performance: Evidence from Wall Street

This study concerns the relationship between gender and job performance among brokerage firm equity analysts. Women’s representation in analyst positions dropped from 16 percent in 1995 to 14 percent in 2005. The study found significant gender-based differences in performance on various dimensions. For example, women cover roughly 9 stocks, on average, as compared with 10 for men, and women’s earnings estimates tend to be less accurate than men’s estimates. But the study also found that women are significantly more likely than men to be designated as All-Stars, which indicates that they outperform men in other aspects of job performance. We examined the relationship between gender and performance among sell-side analysts. Sell-side analysts are unique in that key aspects of their job performance can be publicly observed and evaluated. We used the following measures of job performance: number of stocks that analysts follow, longevity on the job, accuracy of analysts’ earnings forecasts, frequency of forecast revisions, and professional reputation (as measured by the coveted All-America Research Team designation in Institutional Investor magazine). Our findings have important implications for investment managers who use analysts’ forecasts as inputs for investment decisions. Understanding the factors that affect the precision of analysts’ forecasts would help managers appropriately weight individual forecasts to arrive at optimal earnings forecasts. We found that forecast accuracy is significantly related to gender. In fact, we found that gender is more important for forecast accuracy than an analyst’s All-Star status on the Institutional Investor survey. Our study also has important implications for understanding gender balance among sell-side analysts. A vast majority of analysts are men, and women are often alleged to face gender discrimination in such high-profile, well-paying jobs. Such concerns have led many investment banks to institute programs to promote diversity. Perhaps surprisingly, as issues of gender discrimination and affirmative action have attracted considerable attention over time, the proportion of female stock analysts has declined. In our study, we set out to determine whether this decline indicates growing discrimination or whether it reflects a shift in women’s career preferences. Gender discrimination means that when faced with a choice between equally qualified women and men, employers prefer to hire men. On the one hand, if gender discrimination affects hiring decisions, one would expect that a higher hurdle is set for women than for men and thus that women who are able to clear that hurdle would, on average, do a better job than their male counterparts. On the other hand, if affirmative action is an important factor in hiring decisions, then employers may set a lower hurdle for women in order to promote gender balance; if affirmative-action-based hiring is prevalent, women would, on average, perform worse than men. We found that women cover roughly one fewer stock than men do and tend to forecast less accurately than their male counterparts; but women are significantly more likely than men to be designated by Institutional Investor magazine as members of the All-America Research Team, which indicates that women outperform men from their clients’ perspective. Overall, neither women nor men exhibit dominant performance relative to the other gender. Taken together, our results do not support the view that employers engage in pervasive gender discrimination in hiring decisions by setting higher standards for women. Longevity on the job is an important consideration in recruitment decisions. We found that women are more likely than men to leave their analyst positions within the first two years after being hired. This statistical relationship between gender and attrition may deter brokerages from hiring women. If women who aspire to be analysts intend to stay on the job longer than indicated by the statistical evidence, they would be well advised to credibly convey their intention to potential employers.