One of the core tenets of capitalism is competition - where the best rise the top, be it goods, services. or talent itself. Just as central to the system are the trading floors, filled with row upon row of desks where traders focus on screens reading out stock performance, aided by the latest, greatest technology that facilitates transaction in nanoseconds. And, it's safe to say, most of those desks are manned by men. As it stands, females make up a mere five percent of traders in the world. In the US, less than 10 percent of Fund Managers are women. Does the dominance of men in the industry indicate that men are simply better traders than women?
The answer is no, and in fact, the opposite may be true.
In partnership with Trading Hub, a global financial information services company, Alexander Mann Solutions recently conducted a study of 350 intern-level employees across several banks, hedge funds and brokerages. The group, which was one third female and two thirds male - reflecting, but still less male-dominated than the industry itself - first underwent a training primer--the same for each gender--then then took on a four-week simulated trading exercise with the ultimate goal of capitalism in mind: make lots of money.
The results challenged fundamental understandings of what characteristics makes a good trader.
For starters, women in our study group were more likely to adhere strictly to the rules laid out in the training they all took together. Shouldn't a good trader forge their own path, doing whatever it takes, within legal boundaries? While they were not engaging in late trades or going over their limits, we found that the men were 2.5 times more likely to break the rules. Rules are for losers.
Women were also less productive than men. Surely this is disqualifying? The break-neck pace of trading is another hallmark of the stock exchange. Act now, or you could miss out on the deal of the century. More trades, more results.
As it turns out, quality does matter more than quantity--even in trading. As the industry increasingly shifts more towards index funds and away from individual trades, it bodes well for women that they were more likely to make better, albeit less frequent, trades than their counterparts. By the end of the study, women made 69 trades on average when compared to 94 for the average male.
Finally, in keeping with some stereotypes, the females in our study group were less likely to take risks. We all know being someone willing to take big risks is generally considered a positive for a trader. After all, stock trading is oftentimes a form of gambling. No risk, no reward, or so they say.
Out in the real world, breaking rules could get lead to some serious financial or personal trouble for these men, and for their employers. It's a highly-regulated field. If you're going to break rules, maybe financial markets are not the best career choice, after all.
By forgoing the risk-driven habits of the men, who were found to be 30 percent more likely to take risks, the women made more careful, better reasoned decisions.
It's looking good for women, right?
Indeed. In the end, our female cohort was 34 percent more successful than its male counterpart. Can you imagine an investment opportunity that yielded a 34 percent better result than the competition? Nothing is a guarantee, but with that tantalizing prospect, it's hard to argue that women shouldn't be given more opportunity in the industry. Maybe it's time to trade men for a better performing option?
That's capitalism, after all.
Paul is a Global Client Partner at Alexander Mann Solutions, with responsibility for overseeing the strategy development and execution for our own Diversity & Inclusion efforts.