Wall Street Women: Underperforming and Overpromoted?

Here’s an interesting new working paper by T. Clifton Green, Narasimhan Jegadeesh, and Yue Tang, all of Emory University, who looked at nearly 8,000 sell-side Wall Street equity analysts in order to assess gender and job performance. In terms of sheer representation, they found that women actually lost ground from 1995 to 2005, from 16% to 13% of analyst positions; larger firms, however, hire more women. And here is what they have to say about the women’s performance versus the men’s:

We find women cover roughly 9 stocks on average compared to 10 for men. Women’s earnings estimates tend to be less accurate. After controlling for forecast characteristics, the difference in accuracy is roughly equivalent to four years of experience. Despite reduced coverage and lower forecast accuracy, we find women are significantly more likely to be designated as All-Stars, which suggests they outperform at other aspects of the job such as client service.

If you assume that an All-Star designation (bestowed by Institutional Investor) increases one’s chances of promotion, this would seem to suggest that female analysts are overpromoted despite underperforming their male colleagues. The study also seems to suggest that women’s quantitative skills are worse than men’s but their “people skills” are better.