THE STASH AUGUST 4, 2009
In 2007, an SAC Capital trader filed suit alleging that his bosses made him take female hormones so that he'd make less risky trades. Implicit in the commentary surrounding the outrageous claim was that women take on less risk than men for biological reasons. And while a number of studies have shown that women behave less competitively than men in many societies, the underlying reasons for the disparity are less clear. But it's turning out that female hormones are probably not the reason.
From Matthew Pearson and Burkhard C. Schipper of UC Davis:
In an experiment using two-bidder first-price sealed bid auctions with symmetric independent private values, we collected information on the female participants' menstrual cycles. We find that women bid signicantly higher than men in their menstrual and premenstrual phase but do not bid signicantly different in other phases of the menstrual cycle. We suggest an evolutionary hypothesis according to which women are genetically predisposed by hormones to generally behave more riskily during their fertile phase of their menstrual cycle in order to increase the probability of conception, quality of offspring, and genetic variety. [emphasis added.]
The results here replicated the findings of another paper which also found that women bid higher than men when their estrogen levels were elevated. Both papers also found that women earned less than men when taking on more risk, which is perhaps another reason financial-sector pay should be regulated.