Given that confidence and risk tolerance are correlated with high levels of pre-natal testosterone, John Coatesâ€”Wall Street trading floor manager turned academicâ€”wondered if the behaviour of high-frequency, successful traders is similarly influenced, and thus innate. Unsurprisingly it was; but it was the extent to which it was found to be true that was surprising:
Coates, Gurnell and Rustichini found what they were expecting: that high-testosterone foetuses grew up to be excellent high-frequency traders. What was surprising was the huge size of the effect. Traders with a low 2D:4D ratio made six times as much money as those with high 2D:4D ratios. In an environment when the best traders earned more than Â£4m a year, this is hardly a trivial discovery.