“Lehman Sisters” Might Not Have Failed
December 19, 2016
Canadian Business — The world of finance has historically been a bit of a boys club. New studies, however, show that this could be to everybody’s detriment, as women may be demonstrably more risk-averse than men.
A trio of economists, led by Dr. Danny Cohen-Zada of BGU’s Department of Economics, recently released research expounding on this theory. The researchers studied thousands of bronze-medal fights at international judo competitions, finding women to be less prone than men to “psychological momentum.”
Judo matches pit fighters who lost the semi-final round against winners of the previous round (called a “repechage”). In the men’s matches, winners of the repechage (rep’-uh-shaz) prevailed 70 percent of the time; in women’s matches, the odds remained even. In other words, male winners kept winning and male losers kept losing.
The difference is likely due to testosterone levels. Men who win in competitive situations feel emboldened to try again, even as the odds of losing grow. Women did not exhibit the same tendency.
Psychological momentum can be an advantage on the judo mat, but can lead to problems on the trading floor.
“Sometimes momentum can create price bubbles in financial markets, because success in a first investment leads men to increase their willingness to take additional risks and reinvest,” says Dr. Cohen-Zada.
“An increased share of women traders in the market might reduce the creation of such bubbles.”