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More women traders needed as men suffer 'testosterone effect'
Danny Brierley24 Oct 2008
STOCK market dealing could be more successful if there were more women on the trading floors, a Cambridge academic claims today.
Research by Dr John Coates, a Wall Street trader turned neuroscientist, said testosterone and cortisol associated with high stress levels clouded the judgment of men paid to make big-money deals.
Dr Coates told the Standard the traders he tested in the City were caught in "feedback loops" where levels of the chemicals, along with confidence and appetite for risk, rose so high they affected their judgment.
Saliva swabs taken from traders showed that at some point the levels reached a point where men became over-confident and took bad risks.
He first noticed the effects and differences between genders while caught up in the dotcom bubble of soaring technology stock prices in the Nineties.
When the so-called bubble eventually burst, Dr Coates said his peers began behaving "as if they had a hangover".
He compared it to bulls, animals which lend their name to fast-growing markets, and enjoy runs of growing confidence as they beat off rivals. Each time they win a fight, he said, they get more aggressive, taking bigger risks until they lose.
He claims the root of the global financial crisis, US sub-prime mortgages given to people who could not afford to pay them back, might not have been so prevalent had there been more senior women in world banking. His work is part of a growing field called "neuroeconomics", which strives to understand people's economic decisions.
Dr Coates said: "I think it really changes the way we see economics. If your risk preference is increasing during the boom and decreasing during the slump then the economic system is more unstable than normal economics has always assumed.
"Ask any central banker and he or she will tell you that it is almost impossible to stop a bubble, even though we think that we can control them with devices like interest rates. It never works. If we understand that economics agents have these elevated levels of stress then it explains why it is that interest rates become a blunt instrument.
"If it is true that this testosterone feedback loop is exaggerating bubbles then it is possible that bubbles are a male phenomenon. Women have only 10 per cent of the testosterone men have and older men have less than younger men. The trading world is 95 per cent young males. If there were more women and older men there might be more stability."
Angela Knight, chief executive of the British Bankers' Association, said: "It is good to have women around, they are often sturdier under fire. They are less likely to buy or sell simply because every-one else is doing it, which is important when markets turn.
"Sometimes it is good to have people around who can say, 'hang on a minute, what are the fundamentals of this thing?' That is something women bring."
Dr Coates's research is due to be discussed on a Radio 4 documentary, Money on the Brain. The show, to be aired on Tuesday, also features research from Dr David Lewis of Sussex University. His studies found men shopping were more excited by trainers than sex-shop goods.
Reader views (2)
If I had written "It is good to have men around, they are often sturdier under fire. They are less likely to buy or sell simply because every-one else is doing it, which is important when markets turn." I would have the PC police chasing me. Funny how different rules seem to apply. How about closing the markets once a month for a week to avoid irrational moves? ; )
- Jon, LONDON, 24/10/2008 13:29
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If I had written "It is good to have men around, they are often sturdier under fire. They are less likely to buy or sell simply because every-one else is doing it, which is important when markets turn." I would have the PC police chasing me. Funny how different rules seem to apply. How about closing the markets once a month for a week to avoid irrational moves? ; )
- Jon, LONDON, 24/10/2008 13:14
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