Women are generally more risk averse than men, except when making big gambles with huge stakes! Hey, let’s have more women traders! What can go wrong?

21 Jun



This study is a few years old, but it popped up recently in a Forbes article that questions whether the UK Banking Commission’s call for more women traders is actually a sane thing to suggest.




The Forbes article only quotes from the abstract, but I have access to the full text article, so let’s take a closer look at it, shall we?




Patrick McAlvanah, the author of the quoted article, starts out by noting that arousal stimuli very often cause differences in how individuals perceive situations and evaluate their own responses. He quotes another study by James Roney, in which a group of men were asked to view images of young, attractive women, and older, more mature women, and then fill out a survey about their career aspirations. Surprising no one, the men who viewed pictures of young, fertile women placed higher value on material wealth and reported themselves as more ambitious.


James R. Roney, Effects of visual exposure to the opposite sex: Cognitive aspects of the mate attraction in human males, Personality and Social Psychology Bulletin, 29 (3) (2003), pp. 393–404




Another study asked men to handle women’s lingerie and view images of attractive women and then play a bargaining game. The men who were exposed to the arousal stimuli were much more focused on immediate rewards, and were willing to accept lower payouts than fairness would dictate.


Again, not really a surprise.


Bram Van den Bergh, Siegfried Dewitte, Digit ratio (2D:4D) moderates the impact of sexual cues on men’s decisions in ultimatum games , roceedings of the Royal Society B: Biological Sciences, 273 (2006), pp. 2091–2095


Wilson and Daly confirmed the effect of attractive women on men’s willingness to accept smaller immediate awards in favor of better long term payouts after the men had viewed images of models, theorizing that the mere presence of young women triggers an involuntary “mating mindset” in men that causes them to disproportionately value short term returns.


Margo Wilson, Martin Daly, Do pretty women inspire men to discount the future?, Proceedings of the Royal Society B: Biological Sciences, 271 (0) (2004), pp. S177–S179


McAlvanah draws all the previous work together to investigate both men and women’s tolerance for risk in the presence of one another, theorizing that:


Individuals may become more tolerant of risks in the presence of the opposite sex if the increased wealth from a successful gamble dramatically improves one’s standing in the mating market. Likewise, if a mere willingness to accept risk is a desirable mate characteristic, then individuals may become more risk-tolerant in the presence of the opposite sex as a signal to potential mates.


And that is exactly what he found. And the higher the stakes, the greater the tolerance for risk. Men were only slightly more tolerant than women, but both demonstrated increased appetites for risk after viewing images of the opposite sex. The control group looked at cars, which had no effect on their risk profile.


risk chart


This effect of increased risk propensity was strongest and most robust for gambles involving large amounts of money, although I still find evidence of the effect for smaller gambles as well. Further, the effect is not specific to males; both males and females exposed to the opposite sex exhibit a heightened risk propensity and at comparable magnitudes.


Here is what is really interesting in McAlvanah’s study: he was looking to see if the attractiveness of the opposite sex had any impact on risk tolerance. Does the effect only kick in when men and women perceive each other to be “mate material”?


Somewhat surprisingly, attractiveness of the photos had no impact: subjects viewing photos of attractive members of the opposite sex behaved identically to subjects viewing unattractive members of the opposite sex. Similarly, viewing appealing versus unappealing car photographs did not impact the control subjects.


When you put men and women together and ask them to make high risk gambles involving large stakes, both men and women will make riskier bets.


Now where would that kind of scenario play out?


stock traders


Oh dear. Two important things happened in the 1980s: the stock market underwent a transformation and regulations on capital requirements were overhauled to allow much, much riskier bets by potential investors; and women started showing up on the trading floor.


Hello Black Monday! October 19th, 1987, 25% of the world’s wealth was wiped out, and the Dow Jones Industrial Average dropped from 2,246 to 1,738 in ONE day.




What the hell happened? That is still the subject of debate, with lots of theories and conspiracies, most of which are about as exciting as cold toast to wade through.


What is more, changes in the nature and structure of our equity market—and a radical shift in its participants—are making shocking and unexpected market aberrations ever more probable.




Looks like to comes down to equity: big gambles with tons of cash and the potential for enormous payouts, if you get the risk factor right.


The UK Banking Commission rightly notes that risk is an unstable factor in current stock markets, and their response is logical, if not sensible:


Women have lower tolerance for risk

We need to reduce the riskiness of stock market gambles

We need more women trading!


Hey, problem solved, right? Get more ladies out on the trading floor and the appetite for risk will decline automatically! Everyone is safer and better off.


battle axe


Except, oh, oops, actually, the OPPOSITE is more likely to happen. Get more women on the trading floor, even seasoned battle axes of solid proportions, and the risk tolerance, especially for high stakes gambles, goes UP, not down.


Oh my. Well, the ladies don’t like that very much. The comments at Jezebel are instructive:


Let’s get rid of the men, then!



Men doing risky things to impress the lady-traders because they can’t help themselves seems like a pretty solid reason to keep THEM off the trading floor. They clearly can’t control their emotions.




Good reading comprehension, SparkPlug! Houston, we have no ignition. Might need a new spark plug. This one doesn’t seem to be working.




Jezebel, as per usual, completely ignores the fact that BOTH men and women exhibit riskier behavior in the presence of one another!


But they may have inadvertently hit on a solution: when women trade with other women, they DO demonstrate a lower tolerance for risk. When men trade with other men, they have a higher tolerance for risk than women, but they still manage to discount the future with some semblance of sanity.


Put them together, though, and all hell breaks loose.


Some markets are very low risk. Some require leaps of faith. Twitter, for example, is valued at $9.8 billion dollars! Based on what? Nobody knows, but they’re gambling that it will payout somehow. Hey, Facebook worked out, right?




It’s unthinkable in political terms, but based strictly on evidence and fact, women should clearly be restricted to trading in low risk portfolios with other women, and leave men to trade the high risk stocks with other men.


That doesn’t mean everyone is going to suddenly make brilliant valuations and the market will never stumble or even outright crash again, but if encouraging a lower risk tolerance is the goal, then making sure men and women do not trade together should, on average, lower the risk profile of the entire market.


I’ll just wait here for my Nobel Prize in Economics.


Honestly, I don’t know enough about this shit to make any real suggestions, but I think I can point out that refusing to even have the conversation because it doesn’t mesh with our political ideologies is dangerous and stupid.


refuse to speak


What we need to do is confirm McAlvanah’s study: it works in theory. Does it work in practice? And if it does, perhaps a few models of women trading with women and men trading with men are in order? I wonder what a proper computer simulation would show over the course of generations of trades?


What we might have is another example of different, but equal. Tim Worstall, at Forbes, is a little pessimistic when he writes:


It is exactly the entry of women into banking that has led to the greater risk taking. At which point the answer is obvious. Rather than encouraging more women into this world we need to ban them from it. Or alternatively, ban men from it. Either way, that’s the only method of reducing the increased risk taking brought on by mixed gender environments.


We don’t need to ban anybody, but why not play to our strengths, and set the field and the competition on gendered lines? What’s so bad about that?




It works for the Olympics. It has to, or no women would ever win anything ever. When it comes to the 50 meter sprint, there is no question that women need to race other women, and men need to race other men.


Why can’t the same be true for stock traders?


Equality may perhaps be a right, but no power on earth can ever turn it into a fact.

Honore de Balzac


Lots of love,








17 Responses to “Women are generally more risk averse than men, except when making big gambles with huge stakes! Hey, let’s have more women traders! What can go wrong?”

  1. Radical Suburbanite June 21, 2013 at 16:18 #

    Jezebel can screech all they want about more women being needed in the finance industry but, like most other male dominated fields, women don’t particularly want to be there. My husband has been a broker at a big firm for 18 years and women aren’t rushing the doors any more now than they were two decades ago.

    I’m presuming you saw the picture of the line outside the men’s room at the tech conference in San Francisco vs. the empty ladies’ room? http://i.dailymail.co.uk/i/pix/2013/06/11/article-2339866-1A43307C000005DC-251_634x366.jpg

    Yeah- it’s like that. And I expect it will continue to be that way for the foreseeable future.


  2. Fred Flange, S.J. June 21, 2013 at 16:51 #

    This is a fun game but isn’t it more correct these days that the vast majority of trades are not made by people at all, but by computers following algorithms by which they track trends in various markets and stocks? So the next crash will be caused not by horny guy and gal traders but by the Singularity? The Matrix? HAL 9000? Colossus The Forbin Project? (OK I’m dating myself there)


  3. IHateFeminists June 21, 2013 at 17:14 #

    Oh yes Jezebel, the Gawker think tank of bullshit feminist idiocracy once again needing a hearty cup of STFU. After browsing that site for a while it is obvious to me that the Jezebel bunch have nothing remotely interesting or edgy to say. Miley Cyrus’s new ass video seemed a hot topic. Maybe an Antigone movement will appear here in the states and fluff their dander as they have Femen in France. At least Femen are nice to look at while they are being bat shit crazy, but the Jezebel herd of hefers collectively look like the harem at Jabba the hutt’s palace. The sight of them makes me want to hock up my lunch…


  4. Alex June 21, 2013 at 17:51 #

    The jezebels try to use hindsight for this shit the way sports fans do. They might sound like experts, but they really don’t know shit and it’s a bad idea to listen to them.


  5. IHateFeminists June 21, 2013 at 18:13 #

    spot on, jezebels short on knowledge and experts in feminist hamster fap…


  6. feeriker June 21, 2013 at 18:18 #

    Yep, pretty much. And the fact that most of these FAILED algorithms and models were behind the Housing Bubble market meltdown five years ago doesn’t seem to have resulted in any lessons learned or re-assessments of the business model. Plus ca change…


  7. feeriker June 21, 2013 at 18:33 #

    Given that the global financial markets are a Titanic headed for the fiat currency iceberg, along with the fact that almost no one in the profession wants to acknowledge this reality, I don’t think it makes any ultimate difference what the ratio of sexes are. Tune in to any of the financial babbling heads shows on any of the cable “news” channels (if you can stomach the experience), and you’ll see that both sexes are equally capable of spewing nonsensical BS that only rarely matches up with ultimate reality. While it’s true that women are generally less risk-averse than men, the impression I come away with is that where financial trading is concerned, both sexes are captivated in equal measure by the two emotional factors that drive the profession: fear and greed, along with an aversion to logic and the misnamed “common” sense. Everyone has a vested interest in “keeping the party going” indefinitely.


  8. judgybitch June 21, 2013 at 18:44 #

    Wouldn’t the riskiness just transfer to whomever is writing the algorithms, then? Or selecting them? I don’t know how it works, but surely at some point a trader determines what their acceptable level of risk IS, and then selects algorithms that use risk as a variable?

    Every other variable could indicate a buy, but if your risk is set at a certain level, the algorithm would reject the transaction?


  9. zykos June 21, 2013 at 22:09 #

    The algorithms are written by software engineers, who usually (you’d hope) have a background in economics. The thing is, these engineers are developing the software in a very male-dominated environment, and they’re not actually trading, or taking risks, just writing “dynamic math”, so the study doesn’t apply.

    The type of trading the software is mostly responsible for is known as a high-frequency trading (HFT). It’s day trading on steroid: basically, software algorithms try to predict the slight shift in the value of a stock in the next second (or fraction of a second, no human would be able to do this manually), and initiates a trade with a volume big enough so that the fractions of cents on the securities actually compound to something large. It’s of course, very prone to error, but it must work better than blind luck, otherwise people wouldn’t be using it.

    But we’re not talking about HFT here, but decisions wether to back up a new startup, or to permanently sell shares in a company that is doing poorly. I wouldn’t worry about the computers just yet.


  10. TMG June 21, 2013 at 23:53 #

    For nearly a decade now, I’ve been wondering when our corporate overlords will realize this “empowerment” they are pushing is going to lose them money in the long run.


  11. Alex June 22, 2013 at 00:09 #

    The housing bubble deal was largely caused by people who saw too much money to think about long term things


  12. Marlo Rocci June 22, 2013 at 01:30 #

    There is not one field in which the answer from Jezebel will be “ban all the men”, unless it’s garbage collecting or some other menial labor they don’t want to think about.


  13. jari65 June 22, 2013 at 09:28 #

    Reblogged this on Jari65 Blog.


  14. princesspixiepointless June 22, 2013 at 13:51 #

    In a nutshell can you explain the hamster wheel brain thing? I’ve seen it mentioned a lot, but don’t get the exact reference. Thanks.


  15. Anthony June 23, 2013 at 15:40 #

    The experiment could be run. Imagine someplace with lots of money washing around, yet with very strictly enforced separation of the sexes in public. The authorities could set up a trading exchange for some commodities or securities, and require that all floor trades be performed by women, with women doing all the back end work, etc.

    Of course, the place that could actually pull this off – with enough money to make it worth having such an exchange, and strict enough sex segregation, is Saudi Arabia.



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