The Minority Alpha: Gender Bias and Information Transmission in Financial Markets
Abstract
Does the social identity of an investor affect information diffusion in financial markets? Using detailed holdings data for actively managed U.S. equity mutual funds from 1999 to 2022, I document a structural asymmetry in how the market processes information from male versus female managers. Portfolios mimicking the high-conviction buy trades of female managers generate significant abnormal returns for up to two quarters following disclosure, suggesting that female-originated signals diffuse slowly into prices. In contrast, male-originated buy signals are incorporated immediately, leaving no post-disclosure alpha. On the sell side, contrarian portfolios buying stocks sold by male managers yield large and persistent positive abnormal returns, whereas sell decisions by female managers elicit muted and delayed price responses. To identify the underlying mechanisms, I analyze heterogeneity in managerial visibility and social connectedness. Fund size (total net assets) and alumni network centrality strongly condition the speed of price incorporation for female managers but have little explanatory power for male managers. Female managers generate delayed abnormal returns only at intermediate levels of visibility or alumni centrality; at high levels, their ideas are incorporated immediately, consistent with faster information diffusion. In contrast, male managers’ trades are rapidly priced regardless of fund size or network position. Direct evidence from peer-response regressions shows that both male and female managers disproportionately react to trades made by male managers, while female-originated signals diffuse slowly and often indirectly. Stratified placebo tests confirm that these results are not artifacts of sample size or fund characteristics. Together, the results show that information diffusion depends crucially on the social position of their originators. Gender operates as a friction in information transmission: male managers occupy central positions in informal information networks and command immediate attention, while female managers face higher visibility thresholds before their ideas are efficiently incorporated into prices. These findings have implications for asset pricing, institutional trading, and the economic consequences of underrepresentation in financial markets.