Coates J., Gurnell M. & Rustichini A. (2009) Girls can’t trade

Coates, John M., Mark Gurnell and Aldo Rustichini (2009) Second-to-fourth digit ratio predicts success among high-frequency financial traders. Proceedings of the National Academy of Science, 106/2: 623-8.


What does traders’ success on the market floor depend on? Earlier studies have shown that one’s level of testosterone did affect one’s daily results. Since “prenatal androgens have organizing effects on the developing brain, increasing its later sensitivity to […] testosterone”, it would make sense that prenatal androgens also have a structural effect on a trader’s results on the long term.A surrogate marker is commonly used to define one’s exposure to prenatal androgens: the second-to-fourth digit length ratio, noted 2D:4D. Such market has been found to predict professional athletes’ performance. In this paper, the autors test the hypothesis that a high exposure to prenatal androgens as indicated by 2D:4D would also predict traders’ long-term profit.

In utero determinism

For this experiment, the authors observed a 49-strong cohort of males engaged in noise trading, i.e. near-instantaneous operations involving at times billions of dollars. And they “used individual traders’ profit and loss (P&L) statements as a primary measure of their relative performance (p.623).

Regression analysis indicates that experience and 2D:4D have a strong and comparable influence on trade (although with opposite signs).

“An experienced traders makes, on average, 9.6 time the P&L of an inexperienced one, and a trader in the lowest tertile of the 2D:4D range makes 11 times the P1L of a trader in the highest tertile. […] Low 2D:4D [experienced] traders make, on average, 5.4 times the P&L of high 2D:4D [experienced] traders.”

Since 2D:4D affects one’s sensitivity to changes in circulating testosterone it is likely that a significant part of the causality is to be found there.

Final remarks and conclusion

Another way to test this hypothesis was to observe the traders’ performance in times of increased market volatility when even more rapid reflexes, scanning ability and lengthy attention spans are required (p.625). In other words, times when one’s physical abilities (as predicted by 2D:4D) matter even more than usual. “Put simply, [the] results show that the lower a trader’s 2D:4D, the more money he makes as volatility increases”.

These results indicate that biology and experience have a roughly equal weight on a trader’s P&L. However this correlation is likely to weaken and even reverse for trader requiring less impulse and more anatycal skills (p.626).

Sexy exception

5 Responses to Coates J., Gurnell M. & Rustichini A. (2009) Girls can’t trade

  1. Anonymous Coward says:

    This topic is further covered in this Financial Times article.

    Alpha males must trade on more than machismo

    Trading managers commonly equate skill with a trader’s profit and loss (P&L). This measure is simple, but also misleading and dangerous. Knowing that a trader made $100m says nothing about the skill involved unless we know how much risk they took. What if that trader could just as easily have lost $500m?

    A better way of sorting the skilful from the brave is to look at the Sharpe ratio, a measure of the steadiness of returns calculated as the P&L divided by the variability of P&L. The higher the variability (or risk), the lower the Sharpe.


    I and my colleague Lionel Page looked at the Sharpe ratios of a group of male high-frequency traders between 2005 and 2007. The experienced traders among them achieved an average Sharpe of 1.02, significantly higher than their benchmark index, Germany’s Dax, which averaged 0.53. Furthermore, these traders continued to make money in 2008, a year when many banks and hedge funds gave back five years of returns.

    We thought testosterone levels might predict the traders’ Sharpe ratios. But they did not. Testosterone levels predicted the amount of risk taken, but not skill.

  2. […] exposure to prenatal androgens as indicated by 2D:4D would also predict traders’ long-term profit.Click here to read more Tags: 4d, aldo, androgens, Brain, coates, financial traders, girls, high exposure, hypothesis, […]

  3. Fletcher says:

    What are your dreams for me?

  4. Hey may I use some of the material here in this blog if I link back to you?

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