Ron Wilcox on Money and Marriage

16/12/2009

The 2009 "The State of Our Unions" report, issued this month by the National Marriage Project at the University of Virginia and the Institute for American Values, focuses on how the so-called "Great Recession" may be roiling or solidifying marriages. The "Money and Marriage" report showcases several new studies including research by Darden Professor Ron Wilcox.

“Men typically take the lead in managing family investments but they also have two psychological characteristics that play havoc with their ability to invest money,” writes Wilcox. “First, while all humans tend to be overconfident in their own ability, this bias is particularly strong in men. They tend to trade stocks and bonds more actively because they are convinced they know what the next market movement will be. In so doing, they incur a host of transaction costs associated with trading – from commissions, taxes to bid-ask spreads – but do not pick assets better than women.”

Wilcox says that couples can improve their finances by reversing a stereotypical division of labor – have her do the investing while he handles the shopping. Wilcox, author of the book "Whatever Happened to Thrift?," finds that men tend to be more thrifty shoppers because they take less pleasure in shopping. Meanwhile, women tend to have a less inflated view of their own investing skills compared to men, so they are more likely to seek professional investment advice, and less likely to engage in active stock trading that runs up fees and reduces long-term profits.

In his essay, "Smart Money: She Saves, He Spends," Wilcox explains further: "Men think they know what they are doing but often do not, and women think they do not know what they are doing but often do, or at least know enough to turn to a professional."

The National Marriage Project was founded in 1997 and is a nonpartisan, nonsectarian and interdisciplinary initiative located at the University of Virginia. The project provides research and analysis on the health of marriage in America (including the annual "State of Our Unions" report) to analyze the social and cultural forces shaping contemporary marriage, and to identify strategies to increase marital quality and stability.

Founded in 1955, the University of Virginia’s Darden School of Business is a professional school that improves society by developing principled leaders for the world of practical affairs.

For questions or information, contact communication@darden.virginia.edu

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