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Rationally assessing risk and correctly assessing risk are not the same thing. Unless you have a time machine or are engaging in insider trading, rational risk

Rationally assessing risk and correctly assessing risk are not the same thing. Unless you have a time machine or are engaging in insider trading, rational risk assessment is the closest one can get to correct risk assessment. Technical skill, time and effort also matter. For some reason, you seem to think I'm claiming that arbitrary untrained women with no experience must outperform experienced male traders with graduate degrees on account of their womanness. I believe nothing of the kind. My claim is that other things being equal, women statistically make more rational risk assessments than men. Of course people in finance should have training and skill. If Wall St. were more committed to better risk management and the profitability that results, then perhaps it would do more to ensure that more women had the necessary training and skill sets; I understand that multi million dollar salaries are quite effective at motivating people. To prove that hiring women would increase profits, you need to show that female traders would make more profits than male traders, not show that they are more rational. We don't live in a world where there are lots of women in the upper echelons of the finance industry for comparison, so I can't show that. However, I can show you that all other things being equal, stock investors that are male exhibit overconfidence and trade more frequently than female investors. The net result is that female investors outperform male investors. As in, generate more profits. See http://faculty.gsm.ucdavis.edu/~bmbarber/Paper%20Folder/QJE%20BoysWillBeBoys.pdf http://faculty.gsm.ucdavis.edu/~bmbarber/Paper%20Folder/QJE%... As for a PhD, most trading these days is quantitative. As far as I know, most traders are not quants. Also, why do you believe the financial crisis was caused by overconfidence, as opposed to an incorrect evaluation of the facts? The two are closely related, are they not? Overconfident people tend to make incorrect evaluations: their confidence makes them ignore discrepancies that should be investigated. It also makes them shut out dissenting voices warning of future problems. Your question seems akin to asking "why do you believe the Challenger explosion was caused by a crappy design rather than the failure of an o-ring seal?".

yummyfajitas 16y ago
For some reason, you seem to think I'm claiming that arbitrary untrained women with no experience must outperform experienced male traders with graduate degrees on account of their womanness. My claim is that other things being equal... You said: Men are more likely to make irrational choices because they systematically discount quantifiable risk. If our institutions were rational, [...] women would be well represented in the upper echelons of the finance industry... I said: Holding all else equal, you are right. But all else is not equal... [mentions background, skillset, personality, effort] You said: Um, why does any of that matter when women would increase corporate profits? That's why I believe you are claiming "womanness" would increase corporate profits - because you completely discounted everything besides that. Also, your result for retail investors at a discount brokerage is irrelevant. Average trader at financial firms >> average eTrade user. Regarding quant traders, I admit my personal sampling may be somewhat skewed (I'm a quant trader, formerly academic math). Tell me; what do you believe is the typical background/skillset of a non-quant trader, and what fraction of people with that background/skillset are women? Also, overconfidence is not the only type of logical fallacy. I suspect that groupthink and an unwillingness to go against the crowd played a much greater role than overconfidence in the housing bubble.
- MichaelSalib 16y ago
  That's why I believe you are claiming "womanness" would increase corporate profits - because you completely discounted everything besides that. Ah I see. My apologies for my lack of clarity then. In the original comment, I was assuming women traders with some level of skill and experience since I can not fathom a world where Wall St hires people with absolutely no knowledge of finance to run trading desks. Also, your result for retail investors at a discount brokerage is irrelevant. Average trader at financial firms >> average eTrade user. It seems quite relevant. Does it prove beyond any doubt that Wall St should have 100% female traders? Of course not. But it does suggest that Wall St firms could reduce risk exposure and improve profits by hiring more women and/or altering their culture. what do you believe is the typical background/skillset of a non-quant trader, and what fraction of people with that background/skillset are women? Wait a minute...you're a quant and you're asking me about traders? Don't you already know?
  - yummyfajitas 16y ago
    In the original comment, I was assuming women traders with some level of skill and experience... I'm confused; after I described women as being less likely to get a PhD (one common qualification for finance jobs), you said: Um, why does any of that matter when women would increase corporate profits? If hiring lots of women traders would increase corporate profits while at the same time decreasing the number of PhDs at a firm, why on Earth would that be a problem? It seems you were originally describing hiring women with less of the qualifications often expected in finance (a PhD in particular), on the grounds that their presence would increase profits. You seem to be changing your argument quite a bit. As for trader backgrounds, I told you the background of the traders I know. You appeared to disagree with my characterization of traders as mostly quant types. Since you disagree, I'm curious why - perhaps you know something I don't, for instance fields of finance different from mine. Or perhaps you don't.

yummyfajitas 16y ago

For some reason, you seem to think I'm claiming that arbitrary untrained women with no experience must outperform experienced male traders with graduate degrees on account of their womanness. My claim is that other things being equal... You said: Men are more likely to make irrational choices because they systematically discount quantifiable risk. If our institutions were rational, [...] women would be well represented in the upper echelons of the finance industry... I said: Holding all else equal, you are right. But all else is not equal... [mentions background, skillset, personality, effort] You said: Um, why does any of that matter when women would increase corporate profits? That's why I believe you are claiming "womanness" would increase corporate profits - because you completely discounted everything besides that. Also, your result for retail investors at a discount brokerage is irrelevant. Average trader at financial firms >> average eTrade user. Regarding quant traders, I admit my personal sampling may be somewhat skewed (I'm a quant trader, formerly academic math). Tell me; what do you believe is the typical background/skillset of a non-quant trader, and what fraction of people with that background/skillset are women? Also, overconfidence is not the only type of logical fallacy. I suspect that groupthink and an unwillingness to go against the crowd played a much greater role than overconfidence in the housing bubble.

MichaelSalib 16y ago
That's why I believe you are claiming "womanness" would increase corporate profits - because you completely discounted everything besides that. Ah I see. My apologies for my lack of clarity then. In the original comment, I was assuming women traders with some level of skill and experience since I can not fathom a world where Wall St hires people with absolutely no knowledge of finance to run trading desks. Also, your result for retail investors at a discount brokerage is irrelevant. Average trader at financial firms >> average eTrade user. It seems quite relevant. Does it prove beyond any doubt that Wall St should have 100% female traders? Of course not. But it does suggest that Wall St firms could reduce risk exposure and improve profits by hiring more women and/or altering their culture. what do you believe is the typical background/skillset of a non-quant trader, and what fraction of people with that background/skillset are women? Wait a minute...you're a quant and you're asking me about traders? Don't you already know?
- yummyfajitas 16y ago
  In the original comment, I was assuming women traders with some level of skill and experience... I'm confused; after I described women as being less likely to get a PhD (one common qualification for finance jobs), you said: Um, why does any of that matter when women would increase corporate profits? If hiring lots of women traders would increase corporate profits while at the same time decreasing the number of PhDs at a firm, why on Earth would that be a problem? It seems you were originally describing hiring women with less of the qualifications often expected in finance (a PhD in particular), on the grounds that their presence would increase profits. You seem to be changing your argument quite a bit. As for trader backgrounds, I told you the background of the traders I know. You appeared to disagree with my characterization of traders as mostly quant types. Since you disagree, I'm curious why - perhaps you know something I don't, for instance fields of finance different from mine. Or perhaps you don't.