Gender Bias through Recategorization of Financial Analysts

1. Gender Bias through Recategorizationof Financial Analysts Rob Bloomfield Kristi Rennekamp Blake Steenhoven Scott Stewart QWAFEW Boston April 16, 2019

2. What is Research Project About? ______________

3. ______________ What is Research Project About? • Gender • Unconscious Bias • Performance Evaluation In the Context of the Asset Management Business

4. ______________ How was it conducted? Theory CFA conference surveys Investment meeting scenario Practice Conducted additional tests Analyzed performance evaluation data

5. ______________ Why of Interest? • Key CFAI Issue • Company Promotion Programs • Education Programs • Cornell Activity • WIN • Field Experiments

6. ______________ A little data 2016 Survey, 5000+ respondents 2016 U.S. Database Screen Fund Managers Lawyers Doctors 10% 36% 33%

7. ______________ Sample Gender Diversity Activity

8. A little background ______________

9. ______________ Biases in Performance Evaluation • Stereotypes are sets of expectations • Expectations may influence performance evaluations • Evaluationsmay rely more on expectations if • appraisal is complex • appraisal measures are not objective, requiring evaluation based on subjective factors

10. ______________ Data: Men Viewed More Agentic How Likely Person Shows Trait* Men-Women, %-Scale * Haines, Deaux and Lofaro, 2016

11. ______________ Data: CFAs Feel More Agentic How Like Me, 1-6Scale* CFAWomen- WorldWomen World Men-Women * Adams, Barber and Odean, 2016

12. ______________ Data: PM Comp Subjective Investment Professional Comp* * Farnsworth and Taylor, 2006

13. This Study ______________

14. ______________ Research Questions • How do expectations factor into performance evaluation of investment research analysts? • Do the consequences of unexpected behavior differ based on characteristics of the analyst?

15. THEORY: Performance EvaluationImportance of Subjectivity ______________ • Subjective factors used when objective measures are insufficient or unavailable • Noisy, Subject to Bias, Unable to Measure Important Characteristics • Possible subjective measures are countless; impossible for evaluators to attend to all => Evaluators use heuristics to narrow their focus to relevant factors

16. ______________ THEORY: Social Categorization Analyst Jennifer John Female Male

17. ______________ THEORY: RecategorizationResponse to Unexpected Behavior ---------------------------------Evaluation------------------------------- --Information-- Recategorize Individual Performance Evaluation: Reevaluate “Fit” with Role Attribute to Individual Unexpected Behavior Performance Evaluation: Disregard Information Recategorize Information Attribute to Other Factors Based on Relative Ease of Recategorizing Individual vs. Reassigning Behavior

18. THEORY: Performance EvaluationExpectations in Male-Dominated Roles ______________ • Prototypical analyst is characteristically “male” • The job: get good ideas into portfolios • Agentic: Achievement-Oriented, Aggressive, Decisive • Characteristically “female” behavior is unexpected • Communal: Socially-Oriented, Cooperative, Kind • Communal behavior is easier to attribute to the analyst when the explanatory category of “female” is available

19. ______________ THEORY: (Re)categorization With the addition of unexpected communal behavior Analyst Jennifer John X Female Male

20. ______________ APPLICATION: Hypotheses H1: When research analysts exhibit communal, rather than agentic characteristics, performance evaluations will be negatively impacted. H2: The negative effect of exhibiting communal, rather than agentic, characteristics will be greater for female analysts than for male analysts.

21. _______________ APPLICATION: Research Approach • Professional Investment Analyst Experiment • Subjective evaluation; unexpected behavior and alternative category • Evaluation + Q&A • Supplemental Experiment with MBA Students • Semi-Structured Interviews with Experienced Asset Managers

22. ______________ APPLICATION: Experimental Design Design: 2 x 2 between-subjects design Participants: 179 professional investors and analysts Scenario: Description of analyst and recent recommendation Manipulate: Analyst’s gender • “John (Jennifer) covers the automobile industry…“ Manipulate: Response when recommendation voted down • Persistent (Expected): “After the vote, Jennifer arranged to meet with Bill Thomas, the Portfolio Manager, to make her case again.” • Not Persistent (Unexpected): “Jennifer decided not to pursue the matter further, and did not bring it up in subsequent meetings”

23. Results ______________

24. Results – Hypotheses 1 and 2 In your view, do the events summarized above help or hurt Jennifer’s (John’s) case for promotion? Hyp 1: Communal behavior penalized Hyp 2: Women exhibiting communal behavior penalized more

25. Results: Analysis of Free Responses What aspects of the events were most important in making your assessment? Coding Instructions: “Whether these factors are referenced in responses, regardless of whether the reference is positive, negative, or neutral.” Analyst’s Competence Analyst’s Persistence

26. ______________ Supplemental TestMBA Students • Executive MBAs sophisticated, but lack knowledge of investment business context • Hypothesis: • Don’t have persistence expectations • No effects • Results: • Insignificant main effects and interaction • Suggests opportunity for learning

27. ______________ Semi-Structured Interviews • 13 Experienced Asset Managers • 6 female and 7 male • Average 24.5 years investment experience • 11 with experience as portfolio managers • 6 specialize in equity, 7 in fixed-income • Experience across a range of small to large firms • Interview Approach • 4 prepared questions asked of all participants • Interviewers free to deviate to pursue interesting ideas raised in responses

28. Semi-Structured InterviewsFindings ______________ Validated theoretical assumptions • Importance of subjective factors • Prototypical research analyst characteristically agentic • Importance of adhering to expectations of agentic behavior Tightrope for female analysts I think some of it goes back to […] that aggressive personality. And it’s like, women get in trouble because to be good in this field, you do have to have an aggressive personality. But to be too aggressive…who wants to be friends with you? [F24]

29. Semi-Structured InterviewsFindings ______________ Heterogeneity for male analysts; female analysts considered homogeneously aggressive and assertive The male portfolio managers, you do […] get a much broader cross-section, at least along the spectrum of shyer personality vs. more aggressive personality. But all the women I knew in portfolio manager roles: very aggressive. Definitely. Yeah. Outspoken from an average person’s standpoint, maybe too much so. [F21] We have a few female PMs who were analysts […] You can tell they had an uphill battle getting to where they are, and have perhaps needed to be more aggressive, more vocal than they necessarily would. If a shy woman comes in, you just think, “Well she’s just a shy – she’s a woman.” If it’s a male, maybe you think, “Maybe he’s so smart, he can’t communicate or something.”[M64]

30. ______________ Conclusions • Expectations factor into performance evaluation, particularly when subjective criteria is used • Unexpected behavior can negatively impact performance evaluation if interpreted as evidence of “lack-of-fit” • Negative consequences are more likely when the individual has characteristics that can be used to explain the unexpected behavior • Be thoughtful when making evaluations, and use more objective data

31. Thank you