Steve Sapra, Laura E. Beavin, Paul J. Zak

Abstract

What determines success on Wall Street? This study examined if genes affecting dopamine levels of professional traders were associated with their career tenure. Sixty professional Wall Street traders were genotyped and compared to a control group who did not trade stocks. We found that distinct alleles of the dopamine receptor 4 promoter (DRD4P) and catecholamine-O-methyltransferase (COMT) that affect synaptic dopamine were predominant in traders. These alleles are associated with moderate, rather than very high or very low, levels of synaptic dopamine. The activity of these alleles correlated positively with years spent trading stocks on Wall Street. Differences in personality and trading behavior were also correlated with allelic variants. This evidence suggests there may be a genetic basis for the traits that make one a successful trader.

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From the Introduction

Financial market volatility is often attributed to institutional traders who are “cowboys,” taking risky positions that result in market paroxysms [1]–[3]. By one estimate, professional traders were responsible for only 10% of New York Stock Exchange (NYSE) trading volume in the 1960's, while individual investors were the primary source of trades. Professional trades are estimated to account for 90% of NYSE activity today, with traders from the 100 largest institutions responsible for 75% of volume [4]. At the same time, stock market prices are known to exhibit “excess volatility” [5], that is, to move more than predicted by the economic fundamentals of companies they represent. The reasons for excessive market volatility are unresolved, but the high volume of institutional trades suggests it is at least partially due to the behavior of professional stock traders [1], [5]–[8] Understanding the behavior of traders is especially important in light of calls for increased regulation of financial markets after the rapid 48% decline in the NYSE in 2008. Recent research has shown that physiologic factors affect financial decisions. For example, Apicella et al. (2008) found that levels of testosterone in saliva were associated with greater risk-taking in a laboratory investment game [9]. Field studies have also highlighted this relationship, demonstrating that when professional traders trade in volatile markets they have increased cardiovascular tone [10], and that morning testosterone levels predict professional traders' daily profits [11]. Both prenatal and circulating testosterone appear to influence the choice of a financial career and success in this field as measured by longevity