happy female professional executiveWho would have thought that gender may have an effect in the balance of trading in the stock market? A recent study indicates that gender may play a part in the occurrence of market crashes. The researchers suggest that, in order to reduce the incidence of the most extreme of market crashes, the proportion of female traders should be increased. Their analysis seems to suggest that increasing the number of female traders may act to balance trading outcomes that may lead to crashes.

Researchers from the Department of Economics at the University of Leicester that male traders tend to take bigger risks as compared to their female counterparts. While the male traders earn less in general compared to their female counterparts, they tend to be the best performers since they are more comfortable taking bigger risks. The research showed that by increasing the proportion of female to male traders makes the market more volatile. But at the same time, the increase can help reduce the occurrence of serious market crashes.

Previous research indicated that testosterone levels seem to have an effect on risk preferences in humans. Higher levels of testosterone, as well as other steroid hormones have led to greater and even irrational risk taking. Moreover, higher testosterone levels lead to males becoming more sensitive trading outcomes, which heightens the tendency of males to make decisions based on their emotions. It is because of these indications that experts are calling for the rebalancing of gender ratios in the market to make it more stable.

In this study, the researchers looked into the interactions of traders within the financial markets. With it, they were able to create a computer model to determine the hormonal effects across the whole market. Through this approach, the researchers were able to show that the observed physiological effects in individuals can also have a surprising effect in markets as a whole.

Source: University of Leicester. (2016, March 7). Female traders can reduce market crashes, expert says. ScienceDaily. Retrieved March 9, 2017 from www.sciencedaily.com/releases/2016/03/160307114027.htm