Friday, January 16, 2009

Finger length predicts successful financial trading!

This analysis by Coates et al. is a real hoot. They find that the second-to-fourth digit ratio predicts success among high-frequency financial traders:
Prenatal androgens have important organizing effects on brain development and future behavior. The second-to-fourth digit length ratio (2D:4D) has been proposed as a marker of these prenatal androgen effects, a relatively longer fourth finger indicating higher prenatal androgen exposure. 2D:4D has been shown to predict success in highly competitive sports. Yet, little is known about the effects of prenatal androgens on an economically influential class of competitive risk taking—trading in the financial world. Here, we report the findings of a study conducted in the City of London in which we sampled 2D:4D from a group of male traders engaged in what is variously called “noise” or “high-frequency” trading. We found that 2D:4D predicted the traders' long-term profitability as well as the number of years they remained in the business. 2D:4D also predicted the sensitivity of their profitability to increases both in circulating testosterone and in market volatility. Our results suggest that prenatal androgens increase risk preferences and promote more rapid visuomotor scanning and physical reflexes. The success and longevity of traders exposed to high levels of prenatal androgens further suggests that financial markets may select for biological traits rather than rational expectations.

7 comments:

  1. How is this evaluated? Straight wrist palm view, back of hand view? A person can have a short index finger or a short ring finger depending on angulation of the hand. It doesn't take much to skew the ratios. This is a joke, yes?

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  2. Not a joke. They do a very careful analysis. This is what they say about measurement:
    "2D:4D was determined from right-hand measurements only, because right-hand digit ratios have been shown previously to display more robust sex differences and are thus thought to be more sensitive to prenatal androgens.

    When measuring 2D:4D from soft tissue, care must be taken to distinguish regular from irregular or secondary creases. Irregular creases form later than regular creases, after the 11th week of gestation when the fingers start to bend, disrupting the dermal surface. For example, fingers often develop an extra crease that is parallel, but distal, to the metacarpophalangeal crease. When this pattern is found, digit measures are taken from the proximal crease. Also common is an oblique crease angled off from the proximal crease, giving the appearance of a horizontal Y, or several oblique creases feathering the major crease. In these cases, measurement is taken from the middle of the Y pattern. On rare occasions, the proximal regular crease may be broken or unconnected, indicating a gap in the digital pads during development, and the broken crease may overlap in the middle of the finger. In the one case in our study where this pattern occurred, we averaged measures from the 2 halves of the broken crease. "

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  3. and the female counterpart? I mean, obviously I only heard the party rumors that we tell each other about how those lengths would help predict who is a lesbian and who is not... (alright the testosterone exposure is supposed to predict, not the fingers) is there actually a serious study behind this?

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  4. hello friend very interesting post about Finger length predicts successful financial trading! thanks for sharing!!

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  6. Prenatal androgens increase risk preferences and promote more rapid visuomotor scanning and physical reflexes.

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