Man Smart, Woman Smarter


That’s the title of a song made famous by Harry Belafonte on his Calypso album released in 1956. I became well acquainted with it after hearing it at countless Grateful Dead shows in the 1980’s and 1990’s. The song popped into my head last week when I read an article about a study done on the different success rates of male and female traders. The study was conducted by Professor Peter Swan of the University of South Wales, working with researchers Joakim Westerholm and Wei Lu.

Unlike a trader study that I mentioned in a previous blog entry that drew conclusions from a sample size of 18 traders, this was a study of almost 1 million traders in Finland over a 17 year period. Those numbers definitely add a sense of validity to the results. And the results were that women make the better traders.

I’m not sure if the results were released to nearly coincide with International Women’s Day, but it certainly was a good coincidence if not. With a 15 year old daughter in the house, the confluence of these two things made me pay attention. Being a male former trader, I couldn’t help but be drawn in. This is not the first study to draw this conclusion, but it is probably the broadest in the sense of sample size and time. So let’s examine….

According to the results, the women outperformed the men across the board. One conclusion was that the women traded more as contrarians then men. This style makes sense as very often the most profitable trades are also the hardest to make. Selling a security, in this case stocks, as it’s running to its highs, or buying as momentum drives it lower is very counterintuitive to me. I trade momentum. Buy a new high, short a new low. The women didn’t peg those absolute highs and lows, so they did experience some short-term losses. But they held those positions and beat the men across the board.

Why? A few reasons mentioned as well as some of my own conclusions. They traded less. The females seemed to zero in on the best stocks to buy or sell. They didn’t just trade to trade. The author mentions that they didn’t diversify as much. They had their targets and stuck to them. The women also profited more when using their own funds in a personal portfolio. I would conclude that this is because they were better able to choose exactly what they wanted to trade whereas an institutional trader is often handed a “universe” to watch and trade. This was an additional indicator of the better focus of the women over all.

Having traded in futures pits as well as within a “prop-trading” firm, I was usually surrounded by men. There is no doubt that historically males have dominated our trading venues as well as the industry as a whole. And it makes you think how much better the industry would have performed if this study’s results could somehow have been available decades ago. No doubt there would be fewer glass ceilings remaining that still need to be shattered.

The futures pits were easily over 95% male. We justified it as it was too physical for those delicate women to endure. It was also an environment that as a dad, I would not want my own daughter to have to exist in. Upstairs, the trading desks were much the same. Not so physical, but almost as chauvinistic and crude. The industry at that time carried the unequal treatment of women as far as it could, and always found some sort of justification. This study just makes us look dumb, for if our true intent was to just make money, we should have invited and embraced women sooner to accomplish that objective.

It seems from the study that women had patience the men did not possess. They held fewer positions and held them longer. The machismo of the trading pits was not there. The need to prove something to others in the pit or on the desk or anywhere else probably was not a part of decision making. The ability to stick to the singular goal of a positive P&L over the long term was the driver. It’s interesting as men often try to brag about buying the low and selling the high, yet the women came closer to doing just that over time than the men in the study. We (males) talk a big game, the women just win.

I also realized that the one place I have been able to accomplish more of what the women did, that is zeroing in on the correct position to take and letting it ride to long term profit, has been in my researching, testing and implementing of automated trading models and strategies. And this makes sense. The women did better analysis. They had patience and the good sense to only trade the best opportunities. Emotion was not the driver of their decisions at any point, just like my computer models.

This is what optimizing and testing trading ideas is all about as well. Don’t be driven by emotions. Analyze actual test results and listen to them in order to improve the strategy over time. Don’t get out of the trade just because there’s a profit. Get out because the research has led to a successful exit strategy. Trade the signals. Don’t just trade. And make sure that the research that went into all these real time decisions is valid. Patience in the amount of time it takes to do proper research pays off with more successful results. It seems to me that these practices are what the women were doing in a subconscious way without the necessity for all the computer programming I’ve had to depend on.

I love this study. I learned a great deal from a very short article. It opened my eyes to why I still have the belief in well researched automated trading strategies. The research is done before the positions are ever put on. No ‘skin in the game’ to lead to emotional, and wrong, decisions. Just the ability to analyze the market in a rational way and only then act on the decisions your research has led to.

We can all learn from this study. And it encourages me that we have more proof of women having the ability to have at least as much success as men in the financial community. The females I taught and mentored while at Bloomberg were additional proof of this every day. So keep shattering those glass ceilings. Every shard on the floor brings us all closer to having more success at whatever it is we are striving to accomplish.

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