Wall Street and the trading
floors of similar establishments throughout the world are populated with
traders who are well known for their willingness to take risks. Their
expectations are high and their bonuses are large. Studies have reportedly
shown that the testosterone levels in the saliva of the traders are higher than
the normal average level (1).
Our old friend the 2D:4D
digit ratios of the traders were also on the low side of average. So the
concept is that the babies were set up to take risks before they were born and
subsequently pointed at the stock exchanges and set loose to go get ‘em, tiger.
To be successful, it’s not
just low risk aversion that’s required, but they do need good reasoning ability
too, at least in an ideal world without poisonous derivatives. So Brañas-Garza
and Rustichini decided to check this can of worms to see how risk aversion and
reasoning ability interact. They selected 188 students of whom almost two
thirds were women and set about measuring their fingers.
With their digit ratios established, they played lottery games to
establish their risk aversion and did sets of multiple-choice papers to measure
their reasoning abilities.
The first point to note is
that the women’s fingers didn’t give much joy. Correlations weren’t strong enough
and also were, if any, opposite to what was expected from the guys.
For the guys, low 2D:4D
indicated low risk aversion. So far, so good, just like the traders and as
expected. But now we have a surprise. A low digit ratio also corresponded to
higher reasoning scores. Hence, we have an explanation as to how the high-risk
takers survive in the trading world. The suggestion is that they process data
better so the risks aren’t as risky as you and I might think – well some of the
time anyway, but not lately.
So the next time you go to
visit with your financial adviser, take your ruler along to check the 2D:4D
ratio of his digits. If your financial adviser is a woman, you’ll need to read
a different paper. This one claims that the mediating effect of reasoning
ability on lack of risk aversion was absent for the female subjects.
Maybe we should look at job
performance rather than the length of fingers. Or maybe it would be better to
stuff our mattresses with our spare cash (if we have any left.)
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