Academic Insights on Investing

Group Diversity May Constrain the Most Dangerous Investment Bias: Overconfidence

Gender Composition and Group Confidence Judgement: The Perils of All- Male Groups

  • Steffen Keck, Wenjie Tang
  • Management Science, forthcoming
  • A version of this paper can be found here
  • Want to read our summaries of academic finance papers? Check out our Academic Research Insight category.

What are the Research Questions?

Decision makers in organizations often face uncertainty. In these situations, adequate levels of confidence may be just as important for organizational performance as the decisions’ actual quality. A large number of studies have shown that individuals’ level of confidence is in fact not well calibrated; instead, most people are systematically overconfident (see a case study here and here is a summary).

The paper investigates the following research question:

  1. What is the potential effect of gender diversity on a group’s susceptibility to cognitive biases such as overconfidence?

There are three hypotheses tested:

  • Hypothesis 1: Group members in groups with at least one female member are more willing to share opinions and information than those in all-male groups
  • Hypothesis 2: Groups with at least one female group member will make better-calibrated confidence judgments than those consisting of only male members
  • Hypothesis 3: Better calibration in groups with at least one female member will be mediated by a higher extent of opinion and information sharing during the group deliberation

What are the Academic Insights?

By conducting laboratory experiments, the authors find the following:

  1. Compared to all-male groups the inclusion of female members significantly improves information sharing and as a consequence confidence calibration. Additionally, in groups with at least one female member, group members participated more evenly in group discussions than those in all-male groups where discussions ended more quickly and were more likely to be dominated by a single member.

Why does it matter?

This study extends prior work on group confidence calibration to the area of financial forecasts. Results suggest that organizations in the financial sector that rely on such forecasts could attempt to improve the quality of their forecasts by adjusting their human resource practices to ensure that relatively small groups of analysts contain at least one female member.

Additionally, it contributes to the literature on gender diversity and firm performance. Results suggest that one important advantage of avoiding all-male groups might be the increased ability to better deal with situations under substantial levels of uncertainty due to better confidence calibration. Such advantage might not be directly visible in firms’ financial performance but is crucial in keeping firms away from excessive risk, and hence away from the danger of bankruptcy.

The Most Important Chart from the Paper



We explore the joint effects of group decision making and group gender composition on the calibration of confidence judgments. Participants in two laboratory experiments, individually and in groups of three, stated confidence interval estimates for general-knowledge questions and for financial forecasts. Across both studies, our results reveal that groups with at least one female member are significantly better calibrated than all-male groups. This effect is mediated by the extent to which group members share opinions and information during the group discussion. Moreover, we find that compared to a statistical aggregation of individual confidence intervals, group discussions have a neutral or positive effect on the quality of confidence judgments for groups with at least one female group member; in contrast, group discussion actually harms confidence calibration for all-male groups. Overall, our findings indicate that compared to all-male groups, even the inclusion of a small proportion of female members can have a strong effect on the quality of group confidence judgment.

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