3 March 2021
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Women better than men at trading

Peter Switzer
26 March 2010

If Phillipa Green ran Babcock & Brown rather than Phil Green, would the Macquarie wannabe still be around today? And would the GFC market crash have been as bad and even the boom before as big, if women dominated the trading world?

A great yarn in New York Magazine by Sheelah Kolhatkar posed this intriguing and provocative question.

Sheelah brilliantly describes the testosterone-driven soldiers of Wall Street’s trading room ‘marching’ to work.

“Early in the morning on a typical weekday, men can be seen resolutely streaming down lower Broadway, braced against a pulverizing wind,” she wrote. “They are preparing to enter their office buildings, put on their headsets, flick on their Bloombergs, and go to war. And if they look miserable—or weary, frustrated, angry, or petrified—it’s because they have one of the most emotionally taxing jobs in the world.”

She describes them as virtually as robots or pro-boxers waiting for the bell to ring on a trading day.

Testosterone driven

The industry on these guys often argue it’s a trader’s ability to control his emotions in the heat of the trading day that explains who is good at this game.

I recall a mate at a big investment bank who was a hotshot foreign exchange trader who made the institution a lot of money. I taught the guy and he was no Einstein but he was smart enough to make Commerce at UNSW, so he was not dumb. But his colleagues, who both lived in awe of him and were worried about him, knew he had great gut feel. He loved the battle.

He had a great run until the business no longer could do risk management based on his testosterone.

In fact, some studies are suggesting this natural chemical which men over-produce could get in the way of the rational behaviour that should serve a trader well when the heat is on.

Trading floor effects

And there has been research to back up the claim.

“The investment-management company Vanguard released data showing that men were more likely than women to sell stocks at the bottom of the market,” it revealed.

Sheelah poses the good question: “Could it be that the fairer sex is better able to ride the ups and downs of Wall Street without letting their emotions get in the way?”

She then spot lights an experienced trader on the floor of the American Stock Exchange.

“There were always very few women on the floor of the exchanges,” says a hedge-fund manager named Henry Lee, who spent years on the floor of the. “But the women who were successful at it were unbelievable.”

Another trader reckoned when women lose they don’t break computers or phones — they instead cry.

And then I loved this line.
“Well, I’ve cried, too,” he recalled. “I cried in my beer.”

The consensus is that men are more willing to have a shot when the odds are stacked against them — blame it on testosterone. On the other hand, women being more in touch with their emotions and not distracted by movements below the belt, they can think more clearly.

The experienced traders Sheelah talked to used a great analogy that when men get married they tend to level out, where the skydiving option might run second to a day at the beach building sandcastles with the kids. And that would affect the way you trade.

Lehman Brothers and Bear Stearns might be here today if a little less testosterone was in the game.

Sheelah makes a great point based on research.

“It’s the chemicals pulsing through traders’ veins that propel them to place insane bets and enable bank executives to make risky decisions—and those same chemicals tend to have the same effect on everyone, turning them into a herd of overheated animals,” she wrote. “And because the vast majority of these traders and finance executives are men, the most important chemical in question is testosterone.”

The T-thing is linked to violence, aggressive talk and typical guy stuff but what about this:

“A man who stays home with his kids, for example, is likely to see his testosterone level drop over time,” Sheelah revealed. “If you eat more meat, it tends to be higher. As it does when a man is in the presence of an attractive woman, or looking at the Sports Illustrated swimsuit issue. Or in a highly competitive environment with other guys, like a rugby game—or the Bear Stearns trading floor.”

Risk management

My own experience in trying to get women to come on my Sky News Business Channel program — SWITZER — has born out a lot of the differences between men and women.

Men will nearly always say yes to coming on the show. Only time problems can get in the way of them saying yes to an invitation. On the other hand, women tend to want to think about it and can often say no.

Now, they are invited because they have the credentials but it could be a whole host of things that make them say no but it is often linked to how they manage risk. You know: “Can I trust the wild and weird questions of Peter Switzer on live TV?”

Meanwhile the men I ask often won’t ask for questions and just front up. It has to be that T-thing and guys willingness to have a crack that explains it.

(This article is a great read and you should search engine it!) 

 

For advice you can trust, contact Switzer Financial Services.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

 

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