The Great Debate

This essay is adapted from The Hour Between Dog and Wolf, published this month by The Penguin Press.

If, as many maintain, women could have such a tonic influence on the markets, why are there so few women traders? Why are women not pushing their way onto the trading floors, and why are banks and hedge funds not waving them in? Women make up at most 5 percent of the traders in the financial world, and even that low number includes the results of diversity pushes at many of the large banks. The most common explanations ventured for these numbers are that women do not want to work in such a macho environment, or that they are too risk averse for the job.

There may well be a kernel of truth to these explanations, but I do not place much stock in them. To begin with, women may not like the atmosphere on a trading floor, but I am sure they like the money. There are few jobs that pay more than a trader in the financial world. Besides, women are already on the trading floor: they make up about 50 percent of the sales force, and the sales force sits right next to the trading desks. So women are already immersed in the macho environment and are dealing with the high jinks; they are just not trading. Also, I am not convinced women are as easily put off by a male environment as this explanation assumes.

There are plenty of worlds once dominated by men that have come to employ more women: law and medicine, for example, were once considered male preserves but now have a more even balance between men and women (although admittedly not at the top echelons of management). So I am not convinced by the macho environment argument.

What about the second-mentioned explanation, that men and women differ in their appetite for risk? There have been some studies conducted in behavioral finance that suggest that on computerized monetary choice tasks women are more risk averse than men. But here again, I am not entirely convinced, because other studies, of real investment behavior, show that women often outperform men over the long haul, and such outperformance is, according to formal finance theory, a sign of greater risk taking. In an important paper called “Boys Will Be Boys,” two economists at the University of California, Brad Barber and Terrance Odean, analyzed the brokerage records of 35,000 personal investors over the period 1991–1997 and found that single women outperformed single men by 1.44 percent. A similar result was announced in 2009 by Chicago-based Hedge Fund Research, which found that over the previous nine years hedge funds run by women had significantly outperformed those run by men.

By Katrina Pugh
The opinions expressed are her own.

In the jitteriness over the stock market’s worst quarter in two years, a racing volatility index, and protests spreading across the nation’s major cities, all bank leadership (and perhaps all corporate leadership) needs to ask a fundamentally new question: “What blindspots are dogging us?”  This hardly seems like a radical question. After all, most arbitrators make their money off of other people’s blindspots by seeing around corners where others can’t.

But often, leaders are unaware of blindspots in their own organizations.  And they are unaware that they are unaware.

At UBS, blindspots led to $2.3 billion in undetected rogue trading losses, and the ouster of CEO Oswald Gruebel. Analysts have widely criticized UBS’s lax accountability, and oblique, easily-gamed bank systems.  Corporate insider Sergio Ermotti brings a strong track record to UBS’s post of interim CEO. Entering this maelstrom, however, will put his leadership to the test.

The International Monetary Fund has done what it was bid by the G20  and come up with proposals for getting banks to pay for the government help they receive when they get in trouble.  You can read the actual wording here, but it comes down to this:

1) A "Financial Stability Contribution" which would be pooled into a fund that would use it to help weak banks, or just go into general government revenues.

2)  A "Financial Activities Tax" -- perhaps intentionally known as FAT -- to be levied on combined bank profits and remuneration (for which read "bonuses") and paid to governments.

– James Saft is a Reuters columnist. The opinions expressed are his own –

The U.S. policy of keeping zombie financial institutions alive is so clearly failing that it is now attracting attack from inside policymakers’ circle of covered wagons.

The most interesting intervention in the banking debate in the past few weeks was an extraordinary attack by Kansas City Federal Reserve President Thomas Hoenig on what he termed a policy of “piecemeal” nationalization which leaves discredited management in place, repels new capital from the banking system and allows bad assets to fester rather than be cleared.