Women, Testosterone, and Finance

Hormones, not sexism, explain why fewer women than men work in banks.

That the risk-taking end of the financial industry is dominated by men is unarguable. But does it discriminate against women merely because they are women? Well, it might. But a piece of research just published in the Proceedings of the National Academy of Sciences by Paola Sapienza of Northwestern University, near Chicago, suggests an alternative – that it is not a person’s sex, per se, that is the basis for discrimination, but the level of his or her testosterone. Besides being a sex hormone, testosterone also governs appetite for risk. Control for an individual’s testosterone levels and, at least in America, the perceived sexism vanishes.

Dr. Sapienza and her colleagues worked with aspiring bankers (MBA students from the Northwestern University). They measured the amount of testosterone in their subjects’ saliva. They also estimated the students’ exposure to the hormone before they were born by measuring the ratios of their index fingers to their ring fingers (a long ring finger indicates high testosterone exposure) and by measuring how accurately they could determine human emotions by observing only people’s eyes, which also correlates with prenatal exposure to testosterone.

The students were then presented with 15 risky choices. In each they had to decide between a 50:50 chance of getting $200 or a gradually increasing sure payout, which ranged from $50 up to $120. (Some of this money was actually paid over at the end of the experiment, to make the consequences real.) The point at which a participant decided to switch from the gamble to the sure thing was reckoned a reasonable approximation of his appetite for risk.

As the researchers suspected, women and men with the same levels of testosterone generally switched at the same time, demonstrating similar risk preferences. In other words, women who had more testosterone were more risk-loving than women with less, while the data for men at the lower end of the spectrum displayed a similar relationship. Curiously, the relationship between testosterone and risk taking was not as strong for men with moderate to high levels of the stuff, though previous studies have shown this relationship can be significant as well.

In all cases the correlation was strongest when the salivary measure of testosterone was used, suggesting that it is the here and now, rather than the developmental effects of testosterone on the brain, that is making the difference.

The researchers then followed the subjects’ progress after they graduated, to see what sort of careers they entered. As expected, men were more likely than women to choose a risky job in finance. Again, though, the difference was accounted for entirely by their levels of salivary testosterone. The researchers also studied the subjects’ personal investment portfolios after they had graduated, once in June 2008 (pre-crash) and again in January 2009 (post-crash). In a paper that has yet to be published, they demonstrate that the riskiness of these portfolios, too, was strongly correlated with subjects’ responses in the lottery game. The past year has, presumably, been kind to those with low testosterone levels.

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