In High-Stakes Stock Trading, Finger Length Matters

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By Alan Mozes
HealthDay Reporter
Monday, January 12, 2009; 12:00 AM

MONDAY, Jan. 12 (HealthDay News) -- For all those whose ring finger far outstretches their index finger, British researchers have pinpointed the perfect job: high-volume stock trader.

According to a new study, having a relatively long ring finger augurs well for success in those high-stress financial arenas where fast thinking, good reflexes and good old-fashioned guts matter most. A lengthy fourth digit, the authors note, indicates greater exposure to testosterone in the womb, which in turn gives what they call "high-frequency" traders a biological leg up by encouraging the development of the right mix of mental attitude and physical skills for making money in a cutthroat business.

The finding is reported in this week's issue of the Proceedings of the National Academy of Sciences.

"I used to run a trading desk on Wall Street," explained study author John M. Coates. "During that time I had noticed -- during the dot-com bubble -- that the traders were displaying almost clinical symptoms of mania. They were delusional, euphoric, had a diminished need for sleep, and displayed feelings of overconfidence. You couldn't get them to shut up or put a normal sentence together. And I began to think that something physiological was going on."

Coates hypothesized that the chemical driving trading behavior was one of the human steroids, which he described as "massively powerful" in their ability to affect mood, memory and cognition. He zeroed in specifically on testosterone because the relatively few female traders on the floor did not display the same manic behavior as the men.

"So I left Wall Street, in large part to look into the hypothesis that testosterone was driving trader behavior during the bull market," said Coates, who went on to conduct his work as a research fellow with both the Judge Business School and the department of physiology, development and neuroscience at the University of Cambridge in England.

To explore the notion, Coates and his colleagues analyzed 20 months of profit-and-loss records involving 44 male traders who worked on the London trading floor. When the study began, the floor was home to about 200 traders, of whom just three were women.

All the participants were specialized in what's known as "high-frequency trading." In contrast to slower-moving, research-based trading -- the type that occurs with mutual, pension and hedge fund management, for instance -- the authors noted that high-frequency trading involves the lightning-fast buying and selling of securities at values as high as 1 billion British pounds (about $1.49 billion).

Coates and his team observed that this particular form of financial wheeling and dealing is very physically demanding. Rapid-fire trading executions, they said, require extreme concentration, visual vigilance, strong motor-eye coordination and quick reaction time, alongside extreme confidence and a willingness to engage in substantial risk-taking.

Prior research, they added, suggests that these specific qualities are exactly the ones that seem to be particularly enhanced among those exposed to relatively high amounts of testosterone while in the womb because the brains of such individuals go on to develop a greater-than-average sensitivity to the effects of routine circulating testosterone.

The team noted that a reliable marker for high prenatal testosterone exposure is having a fourth finger (ring finger) that is longer than the second finger (index finger), a ratio previously used to predict improved performance in a range of competitive sports. The authors then used this finger size indicator -- known as 2D:4D -- to stack up each trader's financial success with his testosterone exposure while in the womb.

After accounting for both trader age and years of job experience, Coates and his associates concluded that having a relatively long ring finger (meaning more testosterone exposure in the womb) appeared to be equal to experience as a harbinger of greater financial success in high-frequency trading.

They stressed that in other financial arenas, the testosterone effect might not be as central. But in the specific world of high-frequency trading, having a lengthy ring finger relative to the index finger definitely appeared to translate into both higher long-term profitability and a longer period of time in which the person remained in the high-frequency trading field.

"We're the first study to look at this, but the results are just unbelievably strong," Coates said. "Economics generally has overlooked the body. But this shows that hormones actually play a huge role in the market, that the body and mind work together and that the body influences economic life."

More information

For more on testosterone, visit the National Institute on Aging.

SOURCES: John M. Coates, Ph.D., research fellow, Judge Business School, and department of physiology, development and neuroscience, University of Cambridge, England; Jan. 12-16, 2009, Proceedings of the National Academy of Sciences

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