William & Mary Journal of Race, Gender, and Social Justice


Let's face it. Women and men are different in more than just the biological sense. These differences play themselves out in a variety of contexts. Some of them are meaningful in theory or in reality; others are not.

Given an increase in women's involvement in business and finance, it is unsurprising that a multidisciplinary literature is emerging at the intersection of sex or gender differences and corporate governance. Much of the work in this area has centered on women and boards of directors and women in the executive ranks. However, it is important to focus on women not only as corporate directors and officers, but also as investors in firms. Among other things, the identification and analysis of sex-based or gender-related differences in investment behavior may help explain or predict market phenomena and may illuminate defects or gaps in regulatory frameworks or provisions. For example, the investment attributes of female investors may indicate that women are better or less well protected from changes in firms, laws, or the market than their male investor counterparts. Research along these lines is especially relevant at present in light of ongoing allegations of securities fraud and significant volatility in securities markets.

With all of this in mind, this article extends scholarship that questions the existing materiality standard used under Rule 10b-5 (and elsewhere in U.S. securities regulation) and its touchstone notion of the reasonable investor. Specifically, the article asks and answers a seemingly straightforward, yet provocative, question: Is the reasonable investor a woman? The article then explores the potentialsignificance of its key findings - women and men exhibit different investment behaviors and achieve different investment outcomes, and the resulting female investor profile is closer to existing conceptions of the reasonable investor than the resulting male investor profile.

As women become bigger players in the securities markets, it may be comforting to know that they are relatively well protected by existing conceptions of the reasonable investor. The knowledge that women are not completely protected by these existing conceptions and that men are less well protected than women under the current reasonable investor paradigm, however, gives us pause and forces us to reconsider inaction. To that end, this article continues an ongoing academic and practical conversation about when changes in investor protection should be undertaken and how those changes are best made if they are to be undertaken - not just for the benefit of women or men, but for the benefit of all underprotected investors.