Thursday January 15 2009
Traders with lower ring-finger-to-index-finger ratios earn higher profits
“Success isn't written in the stars, it's in the length of your fingers,” suggests The Independent, which claims that finger lengths can predict “everything from sporting prowess to academic ability, sexual orientation to susceptibility to disease”.
The newspaper mentions a study which found that financial traders were more successful if they had longer ring fingers in relation to their index fingers. The underlying basis for this type of study is that a longer ring finger (compared to the index finger) is believed to be linked to higher levels of the male hormone testosterone surrounding a baby before birth.
This particular study analysed the hand measurements and long-term financial performance of 44 City traders, and found that finger length ratios predicted traders' long-term profitability. The researchers speculate that prenatal hormones might be affecting risk-taking behaviours, and that this promotes the rapid eye and hand reflexes needed in trading.
However, the results of this study will need further testing. The number of traders assessed in this study was relatively small, meaning that the results may have occurred by chance. Also, genetic factors are also known to influence finger length, so in future studies researchers must take these into account before such conclusions can be made conclusively.
Where did the story come from?
Dr John M Coates and colleagues from the University of Cambridge carried out this research. The authors acknowledge a range of contributions by individuals, including the traders. Funding for the research is not reported.
The study was published in the Proceedings of the National Academy of Sciences of the United States of America.
What kind of scientific study was this?
This was a cross-sectional study investigating how hormone exposure in the womb might affect “financially influential” risk-taking behaviour in City of London traders. The researchers quote previous studies which show that prenatal androgens, such as the hormone testosterone, have an important effect on organising brain development and future behaviour.
The researchers set about testing the theory that higher prenatal androgen exposure is associated with better financial performance on the trading floor of a bank in the City of London.
Previous studies have found testosterone exposure affects finger length ratio, specifically the length of the ring finger in relation to the index finger. Higher testosterone levels are linked to having a longer ring finger in relation to the index finger.
The researchers approached the bank, which employed around 200 traders, all but three of whom were male. Researchers identified traders who worked on a floor specialising in high-frequency trading, such as securities and futures. This is apparently a noisy floor, requiring maximum attention and fast reflexes for success.
The traders were given an introductory note mentioning the known link between prenatal testosterone and hand shape. The note did not explain why the study was being conducted. The men agreed to complete a questionnaire and have photocopies taken of their right hands. Some were excluded because they had previously broken one of their fingers.
The questionnaire asked for their age, years of trading, and number of older brothers. The traders gave signed consent for the researchers to access profit and loss data from the bank.
The photocopies of the traders’ hands were used to measure the length of the index and ring fingers from the palm-side crease to the tip of the finger. The ratio of finger lengths was calculated from this. This second-to-fourth digit length ratio (2D:4D) is the measure used in the analysis.
Out of the 49 men who agreed to participate, five were excluded because of poor quality hand prints or lack of financial data. During the study, some traders left the firm and others joined, so the data was collected for most of the volunteers at different times. Some traders had less than 20 months of financial data, and the dates of their sample data varied.
The researchers took into account the number of years experience each trader had accrued, since this was found to affect their profitability.
What were the results of the study?
Among the 44 traders who supplied a full set of data, the researchers found that the lower a trader's 2D:4D ratio, the greater his profit/loss ratio. They report this as the correlation coefficient, a measure of how closely the two factors are linked (r= −0.482, p=0.0009).
As the distribution of profit/loss ratios was not evenly spread, the researchers also ranked the traders using other correlation tests. These also showed a significant correlation with digit ratio (r= 0.492, p=0.0007).
The researchers also carried out analyses which showed that the lower a trader's 2D:4D ratio, the longer he stayed in the trading business.
What interpretations did the researchers draw from these results?
Among several conclusions, the researchers say that digit ratios, together with years of training, predict a high-frequency trader's long-term profit and loss.
Further to this, they say that the model suggests that the contributions of biology and experience are equivalent. Moreover, the correlations “we have observed in this cohort between digit ratios and profits hold true over a 20-month period… in both bull and bear markets, so the survival of low-2D:4D traders does not appear to depend on particular market conditions”.
What does the NHS Knowledge Service make of this study?
There are some problems with the study and the researchers’ interpretations:
- Firstly, the study may have selected volunteers in a way that makes them atypical of traders. For example, it is not clear how the subset of traders who were asked to participate compared to the full 200 traders employed by this bank.
- There are also problems with the way the financial data was collected, as individual traders fortunes often go up and down together during prosperous and lean times. So it is only fair to compare the profits made over the same time periods, but this was not possible for many of the traders.
- The researchers did use statistical techniques to control for the likely effect that individual trader’s fortunes would change as a group when times became more or less prosperous. For example, they examined a sub-group of 15 traders who shared the same 20 months of profit and loss data. The researchers also used a technique for filling in missing data, but it is not clear if this adequately corrected for this bias.
- The study was small, and therefore results may have been affected by chance. Larger studies would be needed to confirm these findings.
- The authors note that the results may not apply to other kinds of trading or financial jobs.
As a small cross-sectional study, it is not possible to infer any causal effect of finger length from this study alone. The researchers rightly say that as digit ratios are set early in life, it is probable that digit ratios predict profitability, not vice versa. However, this is not the only aspect to assess when examining potential reasons for this link.
There are many more factors that may be responsible for the association seen. Therefore, further research will be needed before this sort of study leads to anything practical.
Sir Muir Gray adds...
"I can't think of a use for this research finding."